Hong Kong, September 14, 2021 -- Moody's Investors Service has assigned a Baa1 backed senior unsecured
rating to the proposed USD notes to be issued by HPHT Finance (21) (II)
Limited, a wholly-owned subsidiary of Hutchison Port Holdings
Trust (HPHT, Baa1 stable). The notes will be unconditionally
and irrevocably guaranteed by HPHT.
The rating outlook is stable.
HPHT plans to use the net proceeds primarily to refinance its existing
bank loans.
RATINGS RATIONALE
"The Baa1 senior unsecured rating reflects the irrevocable and unconditional
guarantee from HPHT," says Ralph Ng, a Moody's Vice President
and Senior Analyst.
"The proposed issuance will not incrementally increase HPHT's
total debt as the proceeds will primarily be used to refinance its existing
debt," adds Ng.
HPHT's Baa1 issuer rating is underpinned by its (1) strong market
position in China's Pearl River Delta region and in an industry with high
barriers to entry; (2) prudent cost control and debt-management
policies; (3) ownership of quality port assets in Hong Kong SAR,
China, and Shenzhen, China; and (4) sponsorship from
CK Hutchison Holdings Limited (CKHH, A2 stable), which benefits
HPHT's liquidity.
HPHT's good track record of maintaining stable financial metrics
is also a key rating consideration.
Moody's estimates that HPHT's adjusted funds from operations
(FFO)/debt will measure at about 16%-18% over the
next three years, a level that continues to support the company's
Baa1 ratings.
The stable outlook on HPHT's ratings reflects Moody's expectation
that (1) the company's business and financial profiles 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.
Moody's has also considered the following environmental, social
and governance (ESG) factors in its assessment.
HPHT's exposure to environmental risks is low-to-moderate.
The natural conditions of its assets do not require frequent dredging,
which reduces its exposure to environmental risks.
HPHT is exposed to moderate social risks, which is consistent with
the port sector. Considerations include work-related health
and safety regulations, as well as relationships with employees
and customers.
In terms of governance factors, Moody's views HPHT's
financial policy and management quality as robust, as reflected
by the company's quick response to changes in the operating environment
and interest rates, such as through debt reduction.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Upward rating momentum could emerge over time if there is evidence of
strong extraordinary support from the higher-rated CKHH or if HPHT
improves its financial profile, such that its debt service coverage
ratio (DSCR) exceeds 4.5x or retained cash flow (RCF)/debt exceeds
10% on a sustained basis.
On the other hand, downward rating pressure could build over time
if (1) HPHT's dominant market share in the Pearl River Delta area erodes
because of rising competition, increasing the pressure on its profit
margin; (2) the company pursues large debt-funded acquisitions
or capital spending; or (3) there are significant adverse changes
in the regulatory regime or cabotage law, affecting the company's
profitability and cash flow, and causing its DSCR to fall below
2.5x and RCF/debt to drop below 6%, or both,
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 pressure the ratings.
The principal methodology used in this rating was Privately Managed Ports
Methodology published in May 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1129671.
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 1H 2021, the trust handled container throughput
of about 11.7 million twenty-foot equivalent units (TEUs).
As of 1 March 2021, 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%, of which 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
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same series, category/class of debt, security or pursuant
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rating assigned, and in relation to a definitive rating that may
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Moody's general principles for assessing environmental, social and
governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
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
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60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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The Global Scale Credit Rating on this Credit Rating Announcement was
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The first name below is the lead rating analyst for this Credit Rating
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this Credit Rating.
Ralph Ng
Vice President - Senior 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
Yian Ning Loh
Associate Managing Director
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
