May 30 - Standard & Poor’s Ratings Services today assigned its ‘A-’ long-term issue rating and ‘cnAA’ long-term Greater China credit scale rating to the proposed issue of benchmark-sized two tranches of euro-denominated senior unsecured notes guaranteed by Hutchison Whampoa Ltd. (HWL: A-/Stable/--; cnAA). Hutchison Whampoa Europe Finance (12) Ltd. will issue the notes. The rating is subject to our review of the final issuance documentation.
The HWL group will use the notes proceeds to refinance existing borrowings. The proposed issue is in line with our expectation that the group will continue to extend its debt maturity profile and pre-fund upcoming debt maturities.
The rating on Hong Kong-based conglomerate HWL reflects the group’s good cash flows from diverse businesses with a good to strong competitive position, a record of divesting assets and realizing value from diverse assets, and strong liability management and financial flexibility. HWL’s “strong” liquidity, as our criteria define the term, also supports the rating. The company’s modest financial ratios for the rating, and the low profitability and weak cash flows of its third-generation (3G) telecommunications operations temper the above strengths. Further, the group’s renewed investment appetite could set back its improved leverage. We view HWL’s business risk profile as “strong” and its financial risk profile as “intermediate.”
The stable outlook reflects our expectation that HWL will generate satisfactory cash flows and manage its leverage at its target of 25% for a ratio of net debt to net capital, and maintain a high level of liquidity. Our outlook also factors in the group’s strong financial flexibility, including its willingness and track record of divesting assets to raise funds, and its effective control over cash-rich affiliates to stabilize its credit profile.
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008