TEXT-S&P rates Li & Fung's hybrid capital securities 'BBB'

Mon Jan 7, 2013 3:59am EST

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(The following statement was released by the rating agency)

Jan 07 - As announced on Nov. 1, 2012, Standard & Poor's Ratings Services that day assigned its 'BBB' long-term issue rating to a US$500 million U.S. dollar-denominated issuance of hybrid capital securities by Li & Fung Ltd. (A-/Negative/--; cnAA-/--). At the same time, we assigned our 'cnA' Greater China regional scale rating to the notes. These securities are subordinated to all current and future senior debt of the group. Standard & Poor's has assigned "intermediate" equity content to the securities. This means that we will treat them as 50% debt and 50% equity in our financial ratio calculations. Li & Fung has indicated that it will use the proceeds for business development and acquisitions.

A key feature of the securities is deferral of interest perpetually at the company's option but subject to restrictions regarding dividend payments and share repurchase. Other features of the securities include: A step-up in interest-rate spread by 25 basis points after 10 years and by 75 basis points after 30 years; and issuer's right to call the securities in May 2018, May 2023, and on every subsequent interest payment date. The securities also have a limited number of additional issuer call rights linked to the occurrence of certain prescribed external events, such as a change in taxation and accounting.

RELATED CRITERIA AND RESEARCH

-- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008

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