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01 Apr 2009
Approximately USD17.7 billion of debt securities affected
Hong Kong, April 01, 2009 -- Moody's Investors Service has changed to negative from stable the outlook
of Hutchison Whampoa Limited's ("HWL") A3 senior unsecured
rating, following the company's recent results announcement.
"The change in outlook is driven by HWL's weakened credit
metrics as reported in FY2008, and by uncertainty over whether the
company will be able to achieve metrics more in line with the current
A3 rating in FY2009 in the context of weak economic outlook,"
says Peter Choy, a Moody's Vice President & Senior Credit
"Moody's had originally expected HWL's Adjusted Fund
Flow From Operation ("FFO")/net debt to trend towards 30%;
in fact it was about 18.0% in FY2008, reflecting higher
than expected net debt and weaker than expected cash flow generation,"
While EBITDA and cash flow generation improved over FY2007, growth
has slowed down in the 2H2008. The 3G business performance,
particularly in Italy, is facing very difficult market conditions
due to regulatory changes such that free cash flow deficit on 3G widened
"Market conditions are going to be very challenging, and while
HWL's established businesses are generally stable and hence unlikely
to show drastic deterioration, its profitability and cash flow are
inevitably under some pressure," adds Choy.
Moody's notes management's track record and ability to manage
down costs, lower capital expenditures and monetize assets to enhance
the company's liquidity position and to reduce pressure on its profitability.
However, there remains a high level of uncertainty over whether
its credit metrics in FY2009 will materially improve.
The A3 rating reflects HWL's strong liquidity profile with limited
refinancing needs in 2009 -- just 9% of its total
debts are due within 12 months. In addition, the company
has demonstrated strong financial flexibility in the past and Moody's
expects this to continue.
The rating further considers HWL's broad business and geographical diversification
among global port, property investment and development, retail,
telecommunications and infrastructure segments. Most of these established
businesses command strong competitive positions in their respective markets
and consistently generate stable cash flow.
This is, however, counterbalanced by weaker business profiles
in the Chinese property development and retail segments, and the
still-evolving profile for HWL's telecoms business, especially
with regard to its large 3G investments in Europe.
The A3 rating also includes a one-notch downward adjustment due
to structural subordination.
The rating outlook could revert back to stable if HWL's financial
profile improves such that FFO/net debt is reaching 30% or above
on a sustainable basis.
On the other hand, the rating could be downgraded if HWL's FFO/net
debt does not improve and remains significantly below 30% and FFO/interest
coverage below 3.5x; 2) income stability from its established
businesses is disrupted, with recurring annual EBITDA falling below
HKD25 billion-HKD30 billion; 3) cash drain on 3G increases
materially; and/or 4) large debt-funded acquisitions occur
in its established or 3G businesses
Moody's last rating action on HWL was taken on 23 March 2007,
when its rating was affirmed at A3 with a stable outlook.
The principal approach applied in rating HWL is the Special Comment -
Analytical Considerations in Assessing Conglomerates, published
in September 2007, which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Rating
Other methodologies and factors that may have been considered in the process
of rating HWL can also be found in the Credit Policy & Methodologies
Hutchison Whampoa Ltd is a Hong Kong-based conglomerate with a
strong presence in Asia and Europe. Its 5 core businesses are in
the following sectors: (1) ports and related services; (2)
property and hotels; (3) retail; (4) telecommunications;
and (5) energy, infrastructure, finance & investments
HWL is approximately 49.97% owned by Cheung Kong (Holdings)
Ltd ("CKH"). Around 40% of CKH is in turn owned by the Mr.
Li Ka-Shing family trusts.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077
Moody's changes Hutchison Whampoa Ltd's rating outlook to negative
Senior Vice President
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077
No Related Data.
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