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Rating Action:

Moody's upgrades CK Hutchison's rating to A2; outlook stable

17 Nov 2017

Hong Kong, November 17, 2017 -- Moody's Investors Service has upgraded CK Hutchison Holdings Limited's (CKHH) and its subsidiaries' ratings.

The affected ratings are as follows:

- CKHH's issuer rating has been upgraded to A2 from A3;

- The ratings for the subordinated perpetual capital securities issued by CK Hutchison Capital Securities (17) Limited and Hutchison Whampoa Europe Finance (13) Limited and guaranteed by CKHH have been upgraded to Baa1 from Baa2.

- The senior unsecured ratings for the bonds issued by CK Hutchison Finance (16) (II) Limited, CK Hutchison Finance (16) Limited, CK Hutchison International (16) Limited, CK Hutchison International (17) Limited, Hutchison Whampoa Europe Finance (12) Limited, Hutchison Whampoa Finance (14) Limited, Hutchison Whampoa Finance (CI) Limited, Hutchison Whampoa Finance UK plc, Hutchison Whampoa Int'l (12) (II) Ltd., Hutchison Whampoa International (03/33) Ltd., Hutchison Whampoa International (09) Limited, Hutchison Whampoa International (09/19) Ltd, Hutchison Whampoa International (11) Limited, Hutchison Whampoa International (14) Limited, and CK Hutchison International (17) (II) Limited have been upgraded to A2 from A3. These bonds are guaranteed by CKHH.

The outlooks on all the ratings above are stable.

This rating action concludes the ratings review initiated on 27 October 2017 following Moody's publication of its updated cross-sector methodology "Notching Corporate instrument Ratings Based on Differences in Security and Priority of Claim".

RATINGS RATIONALE

"The upgrade reflects our view that CKHH's issuer rating is unaffected by structural subordination to claims at the operating company level, pursuant to the guidance on structural subordination in Moody's updated methodology," says Gloria Tsuen, a Moody's Vice President and Senior Analyst.

"Our view is based on the fact that, despite CKHH's status as a holding company with a majority of the group's claims at the operating subsidiary level, the group's diversified business profile — with cash flow generation across a large number of operating subsidiaries — mitigates structural subordination risks. As a result, we have removed the structural subordination previously incorporated in CKHH's rating," adds Tsuen.

CKHH's rating was previously one notch lower than it would otherwise be because of the risk of structural subordination.

CKHH's strong business position, diversified operations, balanced portfolio, and excellent liquidity support its A2 issuer rating. The company is gaining from investments made during the past few years, particularly in telecommunications.

Most of CKHH's businesses command strong competitive positions in their respective markets and generate stable to improving cash flow. These strengths mitigate its moderate cash flow-related credit metrics, 3 Group Europe's weaker position in some markets, and event and operational risks arising from potential acquisitions.

The stable outlooks reflect Moody's expectation of the group's steady financial profile, absent any event risk, and that the group will maintain significant liquidity.

The ratings could be upgraded, if CKHH's operations show sustained improvement, resulting in adjusted funds from operation (FFO)/net debt rising above 35%, adjusted FFO interest coverage exceeding 7.0x, and unadjusted and adjusted net debt to net capitalization remaining below 20% and 30%, respectively.

The ratings would come under pressure if CKHH's key debt metrics weaken, the stable income from its non-telecommunications businesses is disrupted, the improving trend at 3 Group Europe reverses, and/or the company makes large debt-funded acquisitions.

Indicators of downward pressure on the ratings include: (1) CKHH's adjusted FFO/net debt falling below 25%, (2) adjusted FFO interest coverage dropping below 5.0x, or (3) unadjusted and adjusted net debt to capitalization rising above 25% and 40%, respectively.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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

Listed on the Hong Kong Stock Exchange, CKHH is approximately 30.1%-owned by Mr. Li Ka-shing's family trust, Mr. Li Ka-shing, and his son, Mr. Li Tzar Kuoi.

At 16 November 2017, CKHH had a market capitalization of about HKD378 billion (USD48 billion).

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.

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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.

Gloria Tsuen, CFA
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
Client Service: 852 3551 3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
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

No Related Data.
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