Hong Kong, January 08, 2014 -- Moody's Investors Service has assigned an A2 rating to the USD senior
unsecured notes due 2024 issued by the Hongkong Land Finance (Cayman Islands)
Company Limited.
The rating is based on the unconditional and irrevocable guarantee provided
by Hongkong Land Company Limited ("HKLC").
The notes are being issued under the USD5 billion Medium-Term Note
Program ((P)A2) guaranteed by HKLC. The proceeds will be used for
general corporate activities.
The outlook for all ratings is stable.
RATINGS RATIONALE
"The new debt issue will extend the debt maturity profiles of both HKLC
and Hongkong Land Holdings Limited ("HKLH", collectively
"the HKL group"), and further strengthen their already solid liquidity
profiles," says Kaven Tsang, a Moody's Vice President and
Senior Analyst.
HKLH had USD1.0 billion in cash and USD2.2 billion in unused
committed facilities at end-June 2013.
"The new drawdown will only moderately increase the group's debt leverage,
as part of the proceeds will be used for refinancing existing debt,"
says Tsang.
Moody's expects that HKLH's credit metrics will remain strong and appropriate
for its rating.
HKLH's adjusted EBITDA interest coverage and debt/EBITDA —
which excludes fair value gains, but includes dividends from joint
ventures— will stay at about 6.0-7.0x and 4.5-5.0x
respectively in the next 2-3 years.
HKLC's A2 rating continues to reflect its track record of operating quality
investment properties with high occupancy rates in prime locations in
Asia. The rating is also supported by its strong franchise,
growing level of commercial revenue, and robust performance in a
down-market.
On the other hand, these strengths are tempered by the group's development
activities and expanding business in China, and which add volatility
to its profits.
HKLH's A3 issuer rating also considers its holding company status and
factors in structural subordination risk.
The stable outlook reflects our view that the group will maintain its
prudent approach to operations and financial management, and its
cautious expansion strategy.
Upward rating pressure will be limited in the near term, but could
emerge if earnings from HKLH's investment property business continue to
grow, reducing the volatility arising from its property development
activities.
As such, such activities will not account for a material portion
of its EBITDA [on average over the years not more than 15%
contribution], and its credit profile will remain strong and stable,
with recurring EBITDA interest coverage at 6x or higher.
Downward pressure could emerge if HKLH increases its property development
activities, or engages in material investments funded substantially
by debt, which would impair its financial profile, such that
debt/EBITDA deteriorates to 6.5x and EBITDA/interest falls below
3.5x.
The principal methodology used in this rating was Global Rating Methodology
for REITs and Other Commercial Property Firms published in July 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Hongkong Land Company Limited, incorporated in Hong Kong,
is a wholly owned subsidiary of Hongkong Land Holdings Limited,
which is a Bermuda-incorporated holding company, engaged
in property investment, management, and development.
Hongkong Land Company Limited holds the group's portfolio of 4.9
million sq. ft. in prime office and retail space in Hong
Kong. HKLH is 50.01% owned by Jardine Strategic Holdings
Ltd.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Kaven Tsang
Vice President - Senior Analyst
Corporate Finance Group
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
SUBSCRIBERS: (852) 3551-3077
Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077
Moody's assigns A2 to Hongkong Land's MTN drawdown