Hong Kong, September 06, 2017 -- Moody's Investors Service has assigned a Baa1 backed senior unsecured
rating to the proposed USD bond to be issued by HPHT Finance (17) Limited.
The bond will be unconditionally and irrevocably guaranteed by Hutchison
Port Holdings Trust (HPHT, Baa1 stable).
The rating outlook is stable.
HPHT plans to use the net proceeds from the issuance to refinance existing
bank loans owned by certain subsidiaries of the company.
RATINGS RATIONALE
"The proposed issuance will not materially change HPHT's credit
profile because the net proceeds from the issuance will be used for refinancing
its existing bank loans," says Ralph Ng, a Moody's
Analyst.
Moody's expects that the new issuance will not increase HPHT's
overall debt level, given its refinancing plans. The refinancing
exercise will slightly improve the company's debt maturity profile.
At end-June 2017, HPHT's short-term debt of
HKD4.2 billion accounted for around 13% of its total reported
debt.
HPHT's Baa1 issuer rating is underpinned by its strong market position
in China's Pearl River Delta and in an industry with high barriers
to entry. The ownership of quality container port assets in Hong
Kong and Shenzhen will support the competitiveness of the company.
However, the challenging operating environment in the port industry,
the tariff pressure driven by the consolidation of shipping industry,
as well as its dividend policy will constrain the rating.
Moody's expects that the company's financial profile will
remain stable over the next two years, supported by its manageable
level of capital spending and debt reduction plan between 2017 and 2021,
against the backdrop of the difficult operating environment and increasing
interest rates.
Moody's estimates that HPHT will incur capex of HKD1.9 billion
in 2017, including for its West Port project, compared to
about HKD1.8 billion in 2016. Overall, Moody's
estimates that the company's adjusted funds from operations (FFO)/debt
will stay at 13%-15% over the next two years.
The stable rating outlook reflects Moody's expectations that:
(1) HPHT's business and financial profile will remain stable; (2)
it will continue its modest capex program with minimal cost or schedule
overrun risks; and (3) there will be no material changes in CK Hutchison
Holdings Limited's (CKHH, A3 stable) sponsorship, its
unit holdings and its control of the trustee-manager.
Upward rating pressure 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; and/or retained cash flow/capex
exceeds 0.6x on a sustained basis.
Downward rating pressure could emerge over time if: (1) HPHT's dominant
market share in the Pearl River Delta erodes due to rising competition,
which pressures its profit margins; (2) HPHT pursues large debt-funded
acquisitions or capital spending; and/or (3) there are significant
adverse changes in the regulatory regime or cabotage law, affecting
HPHT's profitability and cash flow, and causing its debt service
coverage ratio to fall below 2.6x, and/or FFO/debt to fall
below 9% over a prolonged period.
A material change in CKHH's sponsorship, or a reduction to its unit
holdings and its control of the trustee-manager could also lead
to downward rating pressure.
The principal methodology used in this rating was Privately Managed Port
Companies published in September 2016. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Listed on the Singapore Stock Exchange, Hutchison Port Holdings
Trust (HPHT) operates port assets in the key port cities of Hong Kong
and Shenzhen. In 1H 2017, HPHT handled container throughput
of 11.3 million TEUs and reported total revenue of about HKD5.5
billion over the same period.
In 2016, HPHT achieved market shares in Hong Kong of around 67%
and Shenzhen of around 49%.
CK Hutchison Holdings Limited (CKHH, A3 stable) is HPHT's largest
unit holder, with a 30.07% share at end-June
2017. PSA International Pte. Ltd. (PSAI, Aa1
stable) was the second largest unit holder, with a 10.39%
share.
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 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.
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.
Ralph Ng
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