Hopewell Holdings Rtg Afrmd by S&P;Outlk to Stable.NEW YORK--(BUSINESS WIRE)--July 31, 1997--Standard & Poor's CreditWire 7/31/97 -- Standard & Poor's today has affirmed its triple-'B'-minus corporate credit rating on Hopewell Holdings Hopewell Holdings Limited (Chinese: 合和實業有限公司) HKSE: 0054 , established on 17 October, 1972, is a Hong Kong-listed infrastructure and property firm headed by Sir Gordon Wu. , Ltd., a Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. infrastructure and property developer. The outlook has been revised to stable from negative. Over the last 18 months, Hopewell has made positive changes in both its business and financial profile. The negative outlook was attributable to Hopewell's large leverage position, significant future equity commitments, and additional unplanned investments. The October 1996 partial sale of Consolidated Electric Power Asia Ltd. (CEPA CEPA Canadian Environmental Protection Act CEPA Closer Economic Partnership Arrangement (Mainland China-Hong Kong) CEPA Canadian Energy Pipeline Association CEPA Comisión Ejecutiva Portuaria Autónoma ), followed in July 1997 by the sale of the remaining 19.99%, has positioned Hopewell to better balance its future capital expenditures, as well as to repay nearly US$1.9 billion of bank debt and other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. . This has reduced its consolidated leverage from 50% at fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. 1996 (June 30) to 27% as of March 31, 1997. Looking forward, Standard & Poor's believes that Hopewell has a more manageable capital expenditure program with a clearer focus on infrastructure projects in China and Thailand, by retaining ownership rights to the Tanjung Jati Noun 1. jati - (Hinduism) a Hindu caste or distinctive social group of which there are thousands throughout India; a special characteristic is often the exclusive occupation of its male members (such as barber or potter) B 2X660 MW power project in Indonesia, and through further development of its portfolio of real estate holdings in Hong Kong, Macau, and Malta. However, the Hopewell credit continues to reflect the following risks: -- With the loss of operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. from CEPA, Hopewell has much less diversification in its portfolio. Over 70% of consolidated cash flow over the next four years is expected to be derived from real estate investments. -- There is considerable uncertainty regarding the future of the Bangkok Elevated Road and Train System (BERTS BERTS Bit Error Rate Test Set BERTS Basic Exchange Radio Telecommunications Service ) project in Thailand and its future implementation. To date, Hopewell has invested over US$500 million in this project. -- Success of the Tanjung Jati B power project in Indonesia remains contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent reaching financial closure and completing negotiations with PLN PLN In currencies, this is the abbreviation for the Polish Zloty. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. . Standard & Poor's believes this to be a high-risk project in the overall Hopewell portfolio. -- Cash flow from infrastructure investments in China is pledged to repay project-level debt and is not anticipated to be a source of current cash flow to Hopewell over the medium term. -- While the company has a current strategy of deleveraging and reduced capital expenditure commitments, its track record has been one of shifts in corporate strategy, which makes predictions of future direction difficult. These risks are offset by the following strengths: -- Substantially less leverage after disposal of its stake in CEPA and the repayment of over US$1 billion in bank loans. Recourse debt at the parent company as a percentage of total capital is 14% as of March 31, 1997, while consolidated debt to capital is 27% as of the same date. -- Adequate credit and liquidity measures projected over the next three years. Pretax interest coverage ranges from between 4.5 times (x) and 15.6x at the holding company level. Cash flow to total recourse debt ranges from 40% to 120% for the holding company. -- Ownership of unleveraged property and hotel businesses that provide over US$80 million per year of relatively stable cash flows. -- Expectation of a less aggressive and more discretionary capital expenditure program. -- Reduced exposure to investments in noninvestment-grade countries (Pakistan, Philippines, and India). -- Unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on real estate holdings in Hong Kong. OUTLOOK: Stable. The stable outlook for Hopewell is based upon the company's implementation of a strategy of reduced leverage and better focus on management of its existing portfolio and future investment commitments. Maintenance of the stable outlook depends on the company's commitment to this course of action. Over the next several years Standard & Poor's does not anticipate a downgrade, as cash flow to the holding company is projected to come primarily from real estate operations and to provide adequate debt service coverage for holding company debt. Standard & Poor's views the cash flow from Hopewell's two main Hong Kong properties, Hopewell Center and Panda Kowloon Hotel, to be relatively stable. Because uncertainty remains as to the future development of both BERTS and Tanjung Jati B, there is not much potential for any upgrade in the rating until the uncertainties are removed, Standard & Poor's said. -- CreditWire CONTACT: Suzanne G Smith, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , 212/208-1793; Jim Shi, Hong Kong, 852/2633-3519 Copyright 1997, Standard & Poor's Rating Services |
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