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Global Credit Research - 16 Sep 2010
Approximately USD2.2bn in debt securities affected
Hong Kong, September 16, 2010 -- Moody's Investors Service has today downgraded the issuer and senior unsecured
ratings of PSA International Pte Ltd (PSAI) and PSA Corporation Limited
(PSAC) to Aa1 from Aaa. Moody's has also downgraded the rating
on PSAI's Medium Term Notes Program to Aa1. The outlook for
all ratings is stable.
This action concludes the rating review initiated on July 29, 2010.
"The one-notch downgrade reflects a modest adjustment to
the very high shareholder support assumption factored into PSAI/PSAC's
ratings," says Elizabeth Allen, a Moody's VP/Senior
"As we have previously commented, the trend towards internationalization
by PSAI -- via the acquisitions it has made in the last
five years or so -- warrant a slight reduction in such support
assumption and a distinction between the ratings of these entities and
their 100% owner Temasek Holdings (Pte) Ltd (Aaa/stable).
Temasek is 100% owned by the Singapore government (Aaa/stable),"
Moody's recognizes that the status of PSAI and PSAC are critical to the
Singaporean economy. Even with this adjustment, the expected
level of support from Temasek remains very high. However,
in the absence of any formal guarantee or of a special formalized government
policy or legally granted status, and given the large gap between
their fundamental credit profiles of A2 and A3 and their final ratings,
the ratings of PSAI and PSAC warrant a slight distinction from that of
The current support assumption is consistent with the level of support
assumed for other government-related issuers (GRI) globally.
It is also consistent with the approach taken in the rating of other Temasek-linked
companies, such as Singapore Power Ltd (Aa3/stable) and Singapore
Telecommunications Ltd (Aa2/stable). The level of support incorporated
into their ratings also reflect their international presence.
The slight adjustment to the support assumption means that PSAI/PSAC's
ratings could become sensitive to changes in their standalone credit fundamentals
or their baseline credit assessments (BCAs).
PSAI's A3 and PSAC's A2 BCAs are underpinned mainly by their
global market positions and dominant positions in the port of Singapore,
as well as traditionally strong profitability and throughput growth.
The group generates steady recurring cash flow and income -- even
during difficult times in 2008 and 2009.
However, their BCAs are constrained by PSAI's modest consolidated
financial profile, its overseas expansion, and the capital
needs of some of its overseas ports, which are in their start-up
PSAI's and PSAC's BCAs are closely linked. PSAC,
the core cash flow and profit generator of the PSAI Group, is wholly
owned by PSAI, such that its financial profile and policies are
determined by PSAI. The one-notch difference between their
BCAs reflects structural subordination at PSAI, which is the group's
holding company and relies on dividends from its subsidiaries and investment
to make its debt payments.
The stable outlook reflects Moody's expectation that PSAI/PSAC's
underlying business and financial profile will remain steady and assumes
no material changes to their ownership in the near term.
PSAI's and PSAC's ratings are sensitive to changes in Moody's
expectation of the likelihood of support from the shareholders.
The ratings could be downgraded if the rating of Temasek and/or the rating
of the Singaporean government is downgraded.
Downward rating pressure could also emerge if evidence suggests weakening
support from the shareholders, such as 1) a reduction in ownership,
2) material increase in debt leverage without new equity capital,
3) further material overseas acquisitions or investments.
A reduction of their BCAs would put pressure on the rating. Their
BCAs could be under pressure if the consolidated credit metrics of PSAI
deteriorate, including debt/EBITDA exceeding 5-5.5x
and retained cash flow/debt below 10% on a consistent basis.
Moody's last rating action on PSAI and PSAC was taken on July 29,
2010, when Moody's put their Aaa ratings on review for possible
The principal methodology used in rating PSAI and PSAC was Government-Related
Issuers: Methodology Update published in July 2010. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
PSAI/PSAC's ratings have been assigned based on factors that Moody's believes
are relevant to their risk profiles, such as their (i) business
risk and competitive position compared with other firms within the industry;
(ii) capital structure and financial risk; (iii) projected performance
over the near to medium terms; and (iv) management's track record
and tolerance for risk. These attributes were compared to those
of other issuers both in and outside PSAI/PSAC's core industry; the
company's ratings are considered comparable to those of other issuers
of similar credit risk.
PSAI, one of the world's largest port operators, participates
in 28 port projects in 16 countries across Asia, Europe, and
the Americas. It handles a container throughput of 56.9
million twenty-foot equivalent units (TEUs) globally. Its
wholly owned subsidiary, PSAC, has a dominant market share
in the port of Singapore, the busiest port in the world.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's Investors Service Hong Kong Ltd.
Moody's downgrades PSAI/PSAC's ratings to Aa1; outlook stable
24/F One Pacific Place
China (Hong Kong S.A.R.)
No Related Data.
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