Street Calls of the Week
Investing.com -- Fitch Ratings has upgraded Hong Kong-based The Wharf (Holdings) Limited’s Long-Term Issuer Default Rating to ’A-’ from ’BBB+’ with a Stable outlook.
The upgrade reflects Fitch’s higher internal assessment of parent Wheelock and Company Limited’s credit profile, which provides an uplift to Wharf’s rating. Fitch assesses Wheelock as having medium strategic and operational incentives to support Wharf under its Parent and Subsidiary Linkage Rating Criteria.
Wharf’s Standalone Credit Profile remains at ’bbb+’, supported by its strong market position and high occupancy rates of its flagship retail malls in China despite a slowing retail market. The company maintains a strong financial profile with low leverage and healthy coverage.
Fitch’s improved assessment of Wheelock reflects its prudent strategy and sustained improvement in financial metrics through the industry downturn. A stronger-than-expected Hong Kong residential property market in 2025 and limited new investment by 50%-owned Wheelock Properties Limited support further deleveraging.
Wharf was in a slight net cash position as of the first half of 2025, with 40% cash credit assigned to its listed equity investments. The company has moved its entire debt exposure to yuan using cross-currency swaps to take advantage of lower interest rates and hedge against its mainland China business.
Despite pressure on investment property EBITDA, which declined by 5.7% in 2024 and another 5.5% in the first half of 2025, Fitch expects IP EBITDA interest coverage to rise to 5x in the next few years, above the downgrade trigger of 2.5x, due to lower interest costs.
Wharf has budgeted HKD17.6 billion for capital and development expenditure in the coming years, primarily for construction expenses on Hong Kong properties. Fitch expects the company’s internal cash flow to cover these capital expenditures.
The rating agency does not anticipate any positive rating action for Wharf in the near term. Factors that could lead to a downgrade include a lower internal assessment of Wheelock’s credit profile, weaker incentives for Wheelock to provide support, or IP EBITDA interest coverage below 2.5x for a sustained period.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.