Nov 05 - Fitch Ratings has assigned Hong Kong-based Hutchison Whampoa International (12) (II) Limited’s proposed USD notes an expected ‘A- (EXP)’ senior unsecured rating. The securities will be guaranteed by Hutchison Whampoa Limited (Hutchison, ‘A-'/Stable).
The final rating is contingent upon the receipt of final documents conforming to information already received.
The notes are rated at the same level as Hutchison’s rating as the guarantee makes them direct, unconditional, unsecured and unsubordinated obligations of the company.
Hutchison’s ‘A-’ rating reflects the company’s geographical and industry diversification, strong liquidity, well-spread debt maturity profile and access to diverse sources of capital. Hutchison continues to derive stable cash flow generation from its core businesses such as ports and properties, and to improve the performance of its retail division.
Hutchison’s strong liquidity profile is supported by cash and liquid balances of HKD116.5bn and committed undrawn credit limits of HKD6.03bn at end-June 2012, which is sufficient to repay all outstanding debt maturing through to 2014. Over the next 18 months, Hutchison will see around 26% of its consolidated debt (including debt from non-controlling shareholders) mature, and Fitch expects the company to continue to have access to capital markets for its refinancing needs.
Offsetting the strengths are Hutchison’s track record of acquisitions, heavy capex and cash drain from its 3G business which turned EBIT-positive only in 2010. Hutchison’s adjusted debt net of cash/operating EBITDAR remained around 3.9x in 2011and 2010, which Fitch deems appropriate for its ratings given the capital-intensive nature of its businesses.
The Stable Outlook factors in a continued deleveraging trend, given the stable performance of most of Hutchison’s operations and gradual improvement of its 3G business. Fitch does not expect short-term increases in leverage associated with acquisitions would necessarily lead to negative rating action, unless Hutchison’s business risk profile weakens significantly.
What would trigger a rating action?
Negative: Future developments that may, individually or collectively, lead to negative rating action include
-irreversible increase of leverage
-a sharp increase in cash drain from the 3G segment
Positive: No positive rating action is expected in the foreseeable future as Hutch’s current leverage is a rating constraint.