Jiuzhong Financial Newsletter, January 21Moody's CorporationIt has rated the issuer and senior unsecured rating of the Hong Kong Railway Company Limited (MTR Corporation Limited, "MTR Corporation", 00066.HK),MTR CorporationWholly owned subsidiary ofMTR Corporation(C.I(.) Limited's supported senior unsecured rating was downgraded one notch from "Aa2" to "Aa3".
At the same time, Moody's Corporation adjusted his rating outlook from "negative" to "stable".
Moody's Corporation maintains MTR Corporation (P) Pmur1 other short-term ratings and MTR Corporation (C.I.) Limited's (P) Pmur1 is supported by other short-term ratings.
The rating action follows Moody's Corporation's announcement on January 20 that Hong Kong, China would be downgraded from "Aa2" to "Aa3" and its outlook adjusted from "negative" to "stable".
The ratings affected include:
Issuer: Hong Kong Railway Company Limited
-issuer rating downgraded from Aa2 to Aa3
-Advanced unsecured rating, downgraded from Aa2 to Aa3
-Advanced unsecured medium term Notes Plan / Shelf rating (Shelf Ratings), downgraded from (P) Aa2 to (P) Aa3
-maintain other short-term ratings (P) Pmur1
-the outlook is adjusted from negative to stable.
Issuer: MTR Corporation (C.I.) Limited
-supported Advanced unsecured rating downgraded from Aa2 to Aa3
-rating of the supported Advanced unsecured medium term Note Program, downgraded from (P) Aa2 to (P) Aa3
-maintain (P) Pmur1 supported other short-term ratings
-the outlook is adjusted from negative to stable.
Rating basis
The downgrade of Hong Kong, China has a negative impact on the credit quality of government-related issuers (GRIs), and GRIs is closely related to the rating and outlook of Hong Kong, China.
According to Moody's Corporation's joint default analysis method for GRIs, the rating or credit quality of the government that supports GRIs is one of the key factors affecting GRIs rating. MTR Corporation's rating includes a sub-upgrade to reflect a very high likelihood of support from the government in Hong Kong, China, where the company's rating is sensitive to changes in rating and outlook.
Moody's Corporation assesses MTR Corporation's high dependence on the Hong Kong government in China, given their close business and financial ties.
In terms of environmental, social and governance factors, MTR Corporation faces moderate social risks, especially the construction of the Shatin to Central Link project in Hong Kong, taking into account the needs of its operations and the safety of its new project. In addition, MTR Corporation also faces governance risks related to his construction activities due to reports that his construction method is not accurate.
MTR Corporation's stable rating outlook reflects:(1) stable rating outlook of Hong Kong, China; (2) MTR Corporation's benchmark credit rating (BCA) remains in the appropriate position of a2.
If Hong Kong, China is upgraded, Moody's Corporation may upgrade MTR Corporation's rating.
Moody's Corporation may consider raising MTR Corporation's BCA credit indicators including:(1) the adjusted debt / capital of the company continues to be less than 15%; and / or (2) the debt / EBITDA profit (excluding non-recurrent income) continues to be less than 1.5 times.
On the other hand, if the rating of Hong Kong, China is downgraded, or if there is a substantial decline in the government's ability to be willing or support the company, Moody's Corporation may downgrade MTR Corporation.
Moody's Corporation may consider lowering MTR Corporation's BCA credit indicators, including:(1) the company's adjusted debt / capital continues to grow to more than 30%; and / or (2) debt / EBITDA profits (excluding non-recurring income) continue to grow by more than 5.0 times.
Since the signing of a 50-year concession agreement to take over Kowloon-Canton Railway Company Limited (Kowloon-Canton Railway Corporation) on December 2, 2007, MTR Corporation Limited has become the only subway operator in Hong Kong, China.
MTR Corporation is listed on the Hong Kong Stock Exchange and is 75.26 per cent owned by the Hong Kong government as of the end of December 2019.