The Hutchison subsidiary and Tongrentang will each hold a per-cent stake in the joint venture, to be named Beijing Tongrentang Hutchison Pharmaceutical Investment Company. Tongrentang will name a third-party enterprise to hold the remaining 2-per-cent stake. The joint venture will invest in Chinese medicine and health-related projects and enterprises.
Print Email Hutchison Whampoa's credit rating is under review for possible downgrade by Moody's Investors Service, which cited a plan by a Hutchison subsidiary to issue guaranteed perpetual capital securities.
The conglomerate has reportedly hired Goldman Sachs to sell the US dollar bond, which may be priced to yield about 6 per cent. The size has not been disclosed and the bond will be issued by a special purpose subsidiary, Hutchison Whampoa International.
A perpetual note is a security with no maturity date that is callable at the issuer's discretion, according to Bloomberg. While interest payments are mandatory, the bond's principal does not have to be paid back, meaning it can be considered equity and used as leverage with no dilution effect on shareholders' equity.
Moody's senior credit officer, Elizabeth Allen, yesterday said the agency expected to confirm Hutchison Whampoa's A3 ratings with a negative outlook 'after the completion of the perpetual capital securities issuance'. Moody's considered the proposed perpetual securities as 'hybrid instruments with debt and equity components'.
An A3 rating is an 'upper-medium' investment grade subject to 'low credit risk', with elements that suggest 'a susceptibility to impairment over the long term'.
A Baa2 grade is Moody's second-lowest moderate credit risk rating. Fitch Ratings has assigned its similarly low BBB rating.
The HK$35 billion Hong Kong-based conglomerate had ambitious growth plans in . CK Hutchison Holdings and VimpelCom have agreed to form a joint venture that will own and operate their respective mobile businesses in Italy, hailing the transaction as the largest M&A deal.
Hutchison Whampoa Ltd.: The Capital Structure Decision case study solution, Hutchison Whampoa Ltd.: The Capital Structure Decision case study analysis, Subjects Covered Capital budgeting Financial strategy International finance by Andrew Karolyi, Larry Wynant, Geoff Crum, Peter .
2. Assess Hutchison Whampoa’s current capital structure in light of its future financing needs. 3. What bond rating do you think Hutchison Whampoa will be able to obtain from S&P?
4. Compare the debt financing options. Explain why you are for/against the Yankee bond option. 5. Bond is an investment product. The investment decision is yours but you should not invest in this product unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
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