Hong Kong, May 29, 2020 -- Moody's Investors Service has affirmed the Baa1 issuer rating of Hutchison
Port Holdings Trust (HPHT), Baa1 backed senior unsecured rating
of HPHT Finance (17) Limited, and Baa1 backed senior unsecured rating
of HPHT Finance (19) Limited.
The outlook on all ratings remains stable.
RATINGS RATIONALE
"The affirmation of HPHT's ratings reflects the resilience of its
credit profile, supported by its prudent cost control and debt-management
policies, despite the negative impact from the coronavirus outbreak,"
says Ralph Ng, a Moody's Assistant Vice President and Analyst.
The stable outlook on HPHT's ratings reflects Moody's expectation that
(1) the company's business and financial profile will remain stable;
(2) it will continue its manageable capital spending program with minimal
costs or schedule overrun risks; and (3) there will be no material
changes in CKHH's sponsorship, its unit holdings and its control
of the trustee-manager.
HPHT's ratings are constrained by HPHT's challenging operating environment
because of slowing economy and demand for Chinese exports, trade
tensions between the US and China and the potential deteriorating export
competitiveness of China's manufacturing industry over the coming 12 months.
The rapid and widening spread globally of the coronavirus outbreak,
deteriorating Chinese and global economic outlook, falling oil prices,
and asset price declines are creating a severe and extensive credit shock
across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The Chinese port
sector is affected by the shock given its sensitivity to consumer demand
and sentiment.
Moody's expects HPHT's container throughput to decline by
10%-15% in 2020 due to the negative impact of coronavirus
outbreak, including disruption in value chain and weakening global
economy, before a moderate recovery by about 6%-12%
in 2021.
Based on these revised assumptions, HPHT's funds from operations
(FFO) to debt will drop to between 13%-16% in 2020
to 2022 from about 15%-16% previously, a level
consistent with its Baa1 ratings.
HPHT demonstrates a good track record of maintaining stable financial
metrics through (1) reducing its debt levels gradually (by around HKD1
billion annually during 2017-2021); (2) controlling the size
of its capital spending; (3) lowering its absolute dividend payments;
and (4) implementing cost control measures.
These attributes reflect the company's strong financial management and
mitigate the expected reduction in revenue and cash flow generation due
to coronavirus disruption and slowing global economy.
Moody's regards the coronavirus outbreak as a social risk under its ESG
framework, given the substantial implications for public health
and safety.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward ratings momentum could emerge over time if (1) there is evidence
of strong extraordinary support from the higher-rated CKHH;
or (2) HPHT improves its financial profile, such that its debt service
coverage ratio exceeds 4.6x or retained cash flows /Capex exceeds
0.6x on a sustained basis.
Downward ratings pressure could emerge over time if (1) HPHT's dominant
market share in the Pearl River Delta erodes because of rising competition,
increasing pressure on its profit margin; (2) the company pursues
large debt-funded acquisitions or capital spending; (3) there
are significant adverse changes in the regulatory regime or cabotage law,
affecting the company's profitability and cash flow, and causing
its debt service coverage ratio to fall below 2.6x and/or FFO/debt
to fall below 10% over a prolonged period.
A material change in CKHH's sponsorship or a reduction in its unit holdings
and control of the trustee-manager could also lead to downward
ratings pressure.
The principal methodology used in these ratings was Privately Managed
Port Companies published in September 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1040210.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Hutchison Port Holdings Trust (HPHT) operates port assets in Hong Kong
and Shenzhen. In 2019, the trust handled container throughput
of about 20 million twenty-foot equivalent units.
As of 31 December 2019, CK Hutchison Holdings Limited (CKHH) (A2
stable) is the largest unit holder, with a 30.07%
share of the units, while Temasek Holdings (Private) Limited (Aaa
stable) holds 14.02% and PSA International Pte. Ltd.
(Aa1 stable) holds 10.39%.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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These ratings are solicited. Please refer to Moody's Policy
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Moody's considers a rated entity or its agent(s) to be participating
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the rated entities are participating and the rated entities or their agent(s)
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tab on the issuer/entity page and for details of Moody's Policy
for Designating Non-Participating Rated Entities.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Ralph Ng
Asst Vice President - Analyst
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Terry Fanous
MD-Public Proj & Infstr Fin
Project & Infrastructure Finance
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
