(The following was released by the rating agency)
SINGAPORE (Standard & Poor's) Aug. 28, 2012--Standard & Poor's Ratings Services today assigned its 'BBB+' rating to the proposed issue of senior unsecured offshore notes by Tencent Holdings Ltd. (BBB+/Stable/--; cnA+). We also assigned our Greater China regional credit scale rating of 'cnA+' to the proposed issue.
The ratings are subject to Standard & Poor's review of the final documentation for the bond issuance. We expect Tencent to use the proceeds from the proposed notes for the group's general purposes.
The rating on the China-based Internet services provider reflects our view that the company will retain its strong user base in instant messaging and social networking services in the country. The favorable growth prospects of China's Internet industry and the company's sound financial standing further support the rating. Intense competition and regulatory risks in China partly offset the above strengths. And although Tencent has grown rapidly over the past two to three years, it has yet to prove its long-term sustainability, in our view.
The proposed issue does not affect the corporate credit rating because we believe the issue will not have a significant impact on the company's financial soundness. Despite the increase in debt, we believe the company is unlikely to breach the downgrade triggers of adjusted total debt to EBITDA of 2.0x and the ratio of total debt to total capital of 35% over the next one to two years. In addition, Tencent is highly likely to maintain net cash position in our view. In our view, the company's ratio of priority borrowings to total assets is likely to remain below our notching threshold of 20% for investment-grade issuers.
The stable outlook on the corporate credit rating reflects our expectation that Tencent's mainstay businesses will maintain their steady performances. We expect the company's strong market position and favorable industry growth prospects to support the businesses. The outlook also reflects our view that Tencent will maintain its conservative financial policy and steady cash flows.
RELATED CRITERIA AND RESEARCH
-- Tencent Holdings Ltd. Assigned 'BBB+' Rating With Stable Outlook; Proposed Notes Rated 'BBB+', Nov. 14, 2011
-- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
-- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008