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Rating Action:

Moody's affirms PSA's Aa1 ratings; outlook stable

29 May 2020

Singapore, May 29, 2020 -- Moody's Investors Service has affirmed the Aa1 ratings of PSA International Pte. Ltd. (PSAI), and wholly-owned subsidiaries, PSA Corporation Limited (PSAC) and PSA Treasury Pte. Ltd. The outlook on all ratings remains stable.

A complete list of all affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The affirmation of PSAI's Aa1 issuer and senior unsecured ratings reflects: (1) its baseline credit assessment (BCA) of a3; and (2) the very high level of support that Moody's believes the Government of Singapore (Aaa stable) will provide to PSAI through its parent, Temasek Holdings (Private) Limited (Temasek, Aaa stable), in times of need.

"The affirmation reflects our expectations of very high support from Singapore's government -- PSAI's ultimate shareholder -- as well as PSAI's underlying credit strengths, as reflected by its diverse portfolio and strong market positions globally, which in turn underpin its strong profitability and resilience to economic downturns," says Ray Tay, a Moody's Senior Vice President.

The rapid and widening spread of the coronavirus outbreak, the deteriorating 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 port sector is affected by the shock given its exposure to declining cargo volumes stemming from weakening global trading levels and softer macroeconomic conditions. Moody´s regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety.

"Although there are risks to throughput, we expect PSAI to stay resilient amid the current volatility in trade, aided by its key role in facilitating adjustments to global trade flows through its transhipment hubs, and robust financial metrics," adds Tay, who is also Moody's Lead Analyst for PSAI and PSAC.

Moody's estimates that PSAI and PSAC are likely to experience throughput declines in the region of 8%-12% in 2020. Their throughput recovery in 2021 will be gentler than the 10%-14% recorded in 2010, after the global financial crisis.

Other than the impact of coronavirus and continued trade volatility, PSAI's BCA is also constrained by the capital needs of some of its ports, which are in start-up or expansion phases.

PSAI has an excellent liquidity profile, with ample cash holdings of SGD3.2 billion (USD2.3 billion) as of the end of 2019, which are more than sufficient to cover its expected capex requirements of around SGD1.3 billion (USD0.9 billion) over the next 12 months and debt maturity of around SGD1.8 billion ($1.3 billion) due in 2020. This analysis does not take into account the joint ventures. PSAI also demonstrated its market access and proactive liquidity management by tapping the bond markets twice via PSA Treasury in March and April 2020, successfully raising SGD500 million and USD650 million respectively.

The affirmation of PSAC's Aa1 issuer rating reflects (1) the company's standalone credit assessment of a2; and (2) a 4-notch uplift reflecting Moody's expectation that PSAC will receive a very high level of support from Singapore's government through its parent, PSAI, in times of need.

PSAC derives considerable credit strength -- as reflected in its standalone credit assessment -- from its position as the dominant operator in the Port of Singapore, as well as its track record of strong profitability and resilience through past economic downturns.

Strategically located on important trade routes, Singapore's container port is the second-busiest globally in terms of throughput, making it an important transhipment hub for Asia.

PSAC's next major capex commitment, arising from the development of the Tuas mega port, will be significant but the spend will be spread over two decades.

PSAC is the major profit and cash flow contributor of the group. Its standalone credit assessment is constrained by PSAI's financial profile and overseas expansion strategy, which in turn partly relies on cash flows from PSAC. The close links between the two companies results in PSAC's rating being closely linked to that of PSAI.

PSA Treasury's MTN programme and issuances are unconditionally and irrevocably guaranteed by PSAI. PSAI's obligations under the guarantee will rank at least pari passu with all of its other present and future unsubordinated and unsecured obligations. As such, PSA Treasury's ratings are in line with PSAI's Aa1 issuer rating.

The stable outlook on the ratings reflect Moody's expectation that PSAI and PSAC's underlying financial profiles will remain resilient amid the current global trade headwinds and further assumes continued excellent liquidity.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

An upgrade of the ratings is unlikely, given the volatility in global trade and macroeconomic conditions. In addition, the current ratings adequately reflect the marginal differentiation between the credit profiles of PSAI, PSAC and their ultimate shareholder which is the Singapore government. Given the lack of a special legal status or guarantee from the ultimate shareholder, the ratings of PSAI and PSAC will unlikely be equalized with that of the ultimate shareholder.

The ratings of PSAC, PSAI and PSA Treasury are closely linked, such that PSAC and PSA Treasury would be downgraded should PSAI be downgraded.

The ratings are sensitive to changes in the likelihood of support from the company's shareholder. Moody's could downgrade PSAI if support from its shareholder weakens, as reflected by (1) a decrease in ownership; (2) an increase in debt leverage without new equity capital; and (3) material debt-funded overseas acquisitions or investments, in the absence of other mitigating features or countermeasures.

Its BCA could come under pressure if its consolidated credit metrics weaken, such that PSAI's adjusted funds from operations (FFO)/debt falls below 16% on a sustained basis. This could occur if -- for example -- there are materially large capex and/or dividends payments relative to PSAI's cash flow generating ability, and/or if there is a prolonged and material deterioration in operating conditions, without offsetting countermeasures. The calculation of the metric takes into account the adoption of the latest lease accounting rules and also the debt and capex of PSAI's joint ventures on a pro rata basis.

Moody's could downgrade PSAC if support from its shareholder weakens, as reflected by: (1) a decrease in ownership in PSAI/PSAC; (2) increasing debt leverage at PSAI/PSAC; or (3) further substantial overseas acquisitions or investments by PSAI, without new equity capital injections by Temasek.

A weakening in PSAC's standalone credit profile could exert pressure on its Aa1 issuer rating. However, PSAC's standalone credit profile strongly supports its rating, and as such, there is a low likelihood of downgrade, based on its current growth plan.

The principal methodologies used in rating PSA International Pte. Ltd. were Privately Managed Port Companies published in September 2016 and available at https://www.moodys.com/research/Privately-Managed-Port-Companies--PBC_1040210, and Government-Related Issuers Methodology published in February 2020 and available at https://www.moodys.com/research/Government-Related-Issuers-Methodology--PBC_1186207. The principal methodology used in rating PSA Corporation Limited and PSA Treasury Pte. Ltd. was Privately Managed Port Companies published in September 2016 and available at https://www.moodys.com/research/Privately-Managed-Port-Companies--PBC_1040210. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

One of the world's largest port operators, PSA International Pte. Ltd., has port projects across Asia, Europe and the Americas. It handled gross container throughput of 85.21 million twenty-foot equivalent units (TEUs) globally in 2019. Its wholly-owned subsidiary, PSAC, has a dominant market share in the Port of Singapore. PSAI is wholly owned by Temasek Holdings, which in turn is wholly owned by the Singapore government.

LIST OF AFFECTED RATINGS

Affirmation:

..Issuer: PSA International Pte. Ltd.

.... Aa1 Issuer Rating (Foreign)

.... (P)Aa1 Senior Unsecured MTN (Foreign)

.... Aa1 Senior Unsecured (Foreign)

..Issuer: PSA Corporation Limited

....Aa1 Issuer Rating (Foreign)

....Aa1 Issuer Rating (Domestic)

....Issuer: PSA Treasury Pte. Ltd.

.... (P)Aa1 Backed Senior Unsecured MTN (Foreign)

. Aa1 Backed Senior Unsecured (Foreign)

. Aa1 Backed Senior Unsecured (Domestic)

Outlook Actions:

..Issuer: PSA International Pte. Ltd.

....Outlook, Remains Stable

..Issuer: PSA Corporation Limited

....Outlook, Remains Stable

..Issuer: PSA Treasury Pte. Ltd.

....Outlook, Remains Stable

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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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.

Ray Tay
Senior Vice President
Project & Infrastructure Finance
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
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 Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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