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Rating Action:

Moody's assigns CK Hutchison Holdings A3 rating; withdraws HWL rating

03 Jun 2015

Hong Kong, June 03, 2015 -- Moody's Investors Service has assigned A3 issuer rating to CK Hutchison Holdings Limited (CKHH).

Moody's also has affirmed the A3 rating on the senior unsecured bonds and Baa2 rating on the subordinated perpetual capital securities originally guaranteed by Hutchison Whampoa Limited (HWL) and now guaranteed by both HWL and CKHH.

The ratings outlook is stable.

Moody's has also withdrawn HWL's A3 issuer rating.

These actions follow the completion of the reorganization of HWL and Cheung Kong (Holdings) Limited (unrated) originally announced on 9 January 2015. Under the re-organization, the two companies separated their businesses into a non-property company, CKHH, and a property company, Cheung Kong Property Holdings Limited.

RATINGS RATIONALE

"CKHH's A3 ratings reflect our assessment that CKHH's credit profile is not materially different from its predecessor, HWL," said Joe Morrison, a Moody's Vice President and Senior Analyst.

"Although pro forma credit metrics of CKHH are a bit weaker, the benefits to the business profile from the increased interests in infrastructure assets and cash infusion of HKD55 billion more than offset the divestiture of the interests in the property development business in China."

CKHH will be consolidating Northumbrian Water Group Limited, which owns Northumbrian Water Ltd (Baa1 stable).

CKHH has also increased its interest in Wales & West Utilities Limited to approximately 62%, whose underlying credit strength backs Moody's senior secured Baa1 rating on the bonds issued by Wales & West Utilities Finance Plc. In addition, CKHH now has an approximate 70% interest in Australian Gas Networks Limited (Baa1 stable).

Moody's estimates that pro forma for the reorganization, CKHH's 2014 adjusted funds from operations (FFO)/net debt would have been about 18%, adjusted FFO interest coverage at about 4.5x, and adjusted net debt/capitalization at about 39%.

Over the next 12-24 months, Moody's expects these ratios to at least maintain at similar level or show modest gradual improvement, as (1) 3 Group Europe continues to perform; (2) CKI continues to make cash accretive investments and maintains or increases dividend payments; (3) retail operations continue to be robust; and (4) Husky's large projects come on line as planned and increased volumes help offset the weak price environment.

Furthermore, Moody's also expects CKHH's businesses to maintain their strong cash positions and good liquidity.

CKHH's strong business position, diversified operations, balanced portfolio, and excellent liquidity position support its A3 rating.

CKHH's rating reflects its broad business portfolio and geographic diversification. Most of the group's businesses command strong competitive positions in their respective markets and generate stable to improving cash flows.

Offsetting these strengths to some extent is the weaker market position of 3 Group Europe as well as risk associated with the potential for opportunistic acquisitions.

Nonetheless, 3 Group Europe's earnings and cash flows are improving, and Moody's expects the company to remain disciplined in only doing acquisitions that are accretive to earnings and cash flow.

The weaknesses in HWL's cash-flow-related credit metrics are mitigated by its strong portfolio of quality businesses, liquidity profile, and financial flexibility.

The stable outlook reflects the demonstrated financial discipline of CKHH's management team in maintaining a solid investment grade rating and that any material acquisition/investment will be funded by a combination of cash, debt and equity.

A ratings upgrade is unlikely in the near term, given that CKHH's financial metrics are modestly positioned for its current ratings level. However, positive momentum could arise should CKHH's financials continue to show sustainable improvement such that unadjusted and adjusted net debt to net capitalization fall below 20% and 35%, respectively, and adjusted FFO interest coverage exceeds 6x.

The ratings could come under pressure if: (1) stable income from CKHH's established businesses was disrupted, (2) the improving trend at 3 Group Europe reverses; and/or (3) large debt-funded acquisitions occur in its established or 3G businesses.

Credit metrics indicating downward rating pressure include FFO/net debt remains below 25%, FFO/interest coverage drops below 3.5x-4.0x, and unadjusted and adjusted net debt to capitalization rises above 25% and 40%, respectively.

The principal methodology used in these ratings was Business and Consumer Service Industry published in December 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

CK Hutchison Holdings Limited is one of the largest Hong Kong-based conglomerates. The company has a strong presence in Asia and Europe. Its five core businesses are in: (1) retail; (2) telecommunications; (3) infrastructure; (4) energy; and (5) ports.

Assignments:

..Issuer: CK Hutchison Holdings Limited

.... Issuer Rating (Foreign Currency), Assigned A3

Affirmations:

..Issuer: Hutchison Whampoa Europe Finance (12) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Jun 6, 2017, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Jun 6, 2022, Affirmed A3

..Issuer: Hutchison Whampoa Europe Finance (13) Limited

....Pref. Stock Preferred Stock (Foreign Currency), Affirmed Baa2

..Issuer: Hutchison Whampoa Finance (05) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Jun 28, 2015, Affirmed A3

..Issuer: Hutchison Whampoa Finance (06) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Sep 21, 2016, Affirmed A3

..Issuer: Hutchison Whampoa Finance (09) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Nov 14, 2016, Affirmed A3

..Issuer: Hutchison Whampoa Finance (14) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Oct 31, 2021, Affirmed A3

..Issuer: Hutchison Whampoa Finance (CI) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Aug 1, 2017, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Aug 1, 2027, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Aug 1, 2037, Affirmed A3

..Issuer: Hutchison Whampoa Finance UK plc

....Senior Unsecured Regular Bond/Debenture (Local Currency) Nov 24, 2026, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Local Currency) Nov 24, 2017, Affirmed A3

..Issuer: Hutchison Whampoa International (03/33) Ltd.

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Nov 24, 2033, Affirmed A3

..Issuer: Hutchison Whampoa International (09) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Apr 9, 2019, Affirmed A3

..Issuer: Hutchison Whampoa International (09/16) Ltd

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Sep 11, 2015, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Sep 11, 2015, Affirmed A3

..Issuer: Hutchison Whampoa International (09/19) Ltd

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Sep 11, 2019, Affirmed A3

..Issuer: Hutchison Whampoa International (10) Limited

....Pref. Stock Preferred Stock (Foreign Currency), Affirmed Baa2

..Issuer: Hutchison Whampoa International (11) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Jan 13, 2017, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Jan 13, 2022, Affirmed A3

..Issuer: Hutchison Whampoa International (12) Limited

....Pref. Stock Preferred Stock (Foreign Currency), Affirmed Baa2

..Issuer: Hutchison Whampoa International (14) Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Oct 31, 2017, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Oct 31, 2024, Affirmed A3

..Issuer: Hutchison Whampoa Int'l (12) (II) Ltd.

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Nov 8, 2017, Affirmed A3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Nov 8, 2022, Affirmed A3

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.

Joe Morrison
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 CK Hutchison Holdings A3 rating; withdraws HWL rating
No Related Data.
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