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Investing.com -- Fitch Ratings agency has placed the Long-Term Issuer Default Rating (IDR) of ’A-’ for CK Hutchison Holdings Limited (CKHH) on Rating Watch Positive (RWP). This move follows the recently announced sale of a significant portion of CKHH’s ports business, which is expected to enhance the company’s credit profile.
The proposed transaction is awaiting approval from regulatory bodies and shareholders. The post-transaction credit profile of CKHH might also be influenced by how the company decides to use the cash proceeds from the sale. Fitch will resolve the RWP once the transaction is finalized and there is more clarity on the post-transaction capital structure.
The agency anticipates that the financial profile of CKHH will show improvement after the transaction is completed, with potential cash proceeds exceeding USD19 billion. The company’s business profile is also expected to remain diverse, with stable cash flow generation from the telecom, retail and infrastructure sectors. Further support for the ratings comes from the company’s management team, which has a long history of prudent financial management.
Fitch has also removed CKHH’s ratings from Under Criteria Observation (UCO) following the application of the agency’s updated Corporate Rating Criteria, published on 6 December.
The sale of the ports business is expected to significantly improve CKHH’s net leverage, with EBITDAR net leverage likely to fall well below the agency’s current positive sensitivity of 3.1x. The transaction, which excludes the company’s stake in Hutchison Port Holdings Trust and ports in mainland China and Hong Kong, is subject to regulatory and shareholder approval.
Post-transaction, the company will have three major business lines - telecoms, infrastructure and retail - and is expected to remain well-diversified, potentially reducing sensitivities to global economic and trade cycles.
CKHH’s ratings are also supported by its business diversification by geography and segment, which provides stable cash flow and underpins its strong business profile. CKHH is a conglomerate with infrastructure, ports, retail and telecom segments. Post-transaction, CKHH will continue to be more diversified but with a similar financial profile to that of Reliance Industries (NSE:RELI) Ltd (RIL).
CKHH’s robust liquidity profile and easy access to capital also support its ratings. The company has strong access to capital markets and good banking relationships.
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