Fitch: Hutchison Rating Not Affected by Sale of Watson Stake to Temasek

Mon Mar 24, 2014 1:01am EDT

(The following statement was released by the rating agency) HONG KONG, March 24 (Fitch) Fitch Ratings said today that Hutchison Whampoa Limited's (HWL) sale of 24.95% of its retail arm, A.S. Watson Holdings (Watson), to Temasek Holdings will not affect its Long-Term Issuer Default Rating of 'A-' with Stable Outlook. HWL announced on 21 March 2014 that it planned to sell the equity stake in Watson to Temasek for HKD44bn (USD5.7bn). After the transaction is completed, HWL will hold 75.05% in and retain control of Watson. HWL will distribute about 70% of the net proceeds of HKD43bn to its shareholders as a special dividend and keep the rest for general working capital purposes. Fitch believes that the transaction will immediately help HWL deleverage slightly, but this is balanced by the fact that HWL will lose full control of its operating cash flow at Watson. Profits from the retail division will henceforth be passed to HWL mainly via dividend payments as HWL will not be able to transfer Watson's cash freely to itself with the presence of a significant minority stakeholder. HWL's 75% ownership at Watson will remain strong enough for Fitch to analyse HWL's credit ratings by consolidating Watson's financials. However, if HWL reduces its equity stake significantly, during a potential IPO for Watson in the future, Fitch may deconsolidate Watson's financials when analysing HWL's credit ratings. Contact: Primary Analyst Alex Choi Associate Director +852 2263 9969 Fitch (Hong Kong) Limited 28th Floor, Two Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Vanessa Chan Director + 852 2263 9559 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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