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Fitch keeps Hankyu ratings intact after Hanshin share purchase.

TOKYO, June 21 Kyodo

Fitch Ratings said Wednesday it has decided to keep the credit ratings of Hankyu Holdings Inc. unchanged on grounds that the financial burden stemming from the tender offer for Hanshin Electric Railway Co. shares has stayed within an anticipated level.

Hankyu's long-term foreign and local currency issuer default ratings and senior guaranteed debt ratings therefore stand at BB-plus and the rating outlook of the company, which presides over railway, travel and hotel operations, is graded ''stable.''

By the rating agency's estimates, Hankyu's ratio of interest-bearing debt to EBITDA (earnings before interest, taxes, depreciation and amortization) will rise to 10.4 in the year ending March 2007 from 9.7 in fiscal 2005 when the debts undertaken to finance the tender offer and a generous capital investment plan as well as the Hanshin acquisition are taken into account.

The increase, however, is within Fitch's forecast range, the agency's latest report argues.

Still, even after the Hanshin share purchase has been completed, Hankyu has yet to present a specific vision for its future business activities, notes the report.

Fitch on the other hand points to possible long-term benefits of the takeover of Hanshin, which could materialize in the form of improved overhead and capital investment cost performance and the two companies' cooperation in real estate development and retail businesses particularly in the major commercial district of Umeda in Osaka.

The rating agency also pointed to some worrisome factors such as weak regional economies, the falling birthrate and increased car use, challenges facing both railway firms.

Hankyu completed its tender offer on Tuesday, taking a 63.71 percent stake in Hanshin at a cost of 249.8 billion yen. If approved at the two companies' shareholders meetings on June 29, Hankyu will turn Hanshin into a wholly owned subsidiary by conducting an equity swap on Oct. 1.
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Publication:Japan Weekly Monitor
Date:Jun 26, 2006
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