Analysis: Score Motion: Moody’s Assigns A2 Score to Hyperlink REIT’s Proposed Convertible Bonds

Hong Kong, November 22, 2022 — Moody’s Traders Service has assigned a supported senior unsecured ranking of A2 to the proposed convertible bond to be issued by Hyperlink CB Restricted, a completely owned oblique subsidiary of Hyperlink Actual Property Funding Belief (Hyperlink REIT, A2 steady ). The notes are unconditionally and irrevocably assured by Hyperlink REIT, Hyperlink Holdings Restricted and Hyperlink Properties Restricted.

The ranking outlook is steady.

The Hyperlink REIT plans to make use of the proceeds from the notes to refinance present obligations and for common company functions.

RATINGS RATIONALE

“The Hyperlink REIT’s A2 issuer ranking displays the soundness of its core portfolio of retail properties via financial cycles, monitor document of asset enhancements, and wonderful liquidity from its administration,” says Stephanie Lau, vice chairman and head of Moody’s senior credit score.

The ranking additionally displays the Hyperlink REIT’s excessive enterprise stability, which is supported by the non-discretionary items and providers supplied by its tenants and the extremely diversified tenant combine at its enterprise facilities in Hong Kong SAR, China (Aa3 steady).

As well as, the ranking incorporates dangers associated to the Hyperlink REIT’s excessive monetary leverage, its concentrated operations in Hong Kong, and the belief’s funding and growth technique.

The proposed bonds, which Moody’s considers 100% debt-like, won’t have a major affect on the REIT’s credit score metrics, because the rankings company expects the belief to make use of nearly all of the proceeds to refinance present debt. Even when the entire money proceeds had been used for different common company functions, the potential enhance in debt from this specific bond situation would nonetheless present a monetary buffer in opposition to REIT QE triggers.

With out bearing in mind the Hyperlink REIT’s international forex actions, extra acquisitions or share repurchases, Moody’s forecasts that the belief’s adjusted web debt/EBITDA will enhance to six.3x over the subsequent two years from 6.1x for the 12 months ending in September 2022 (LTM September 2022). This expectation is predicated on assumptions {that a} progress in web debt will greater than offset a modest enhance in earnings.

Particularly, Moody’s expects adjusted web debt to extend to round HKD 55 billion over the subsequent 12-18 months, from HKD 52 billion as of September 30, 2022, primarily to fund excellent buy consideration from acquisitions. marketed and common working capital.

The rankings company initiatives Hyperlink REIT’s annual earnings to develop by a low to mid-single digit share, to round HKD12.2bn over the subsequent 12-18 months from HKD11.9bn in LTM September 2022. Steady retail operations in Hong Kong Sturdy Parking income and the next contribution from newly acquired property will mitigate near-term weak point from the REIT’s mainland China workplace and retail properties, and better common and administrative bills.

Hyperlink REIT property gross revenue and web revenue elevated 4.6% and 4.5% to HKD 6 billion and HKD 4.6 billion respectively within the first half (1H) of the fiscal 12 months which ended on March 31, 2023.

Alternatively, the Hyperlink REIT’s adjusted web debt/EBITDA elevated to six.1x for the September 2022 LTMs from 5.6x in fiscal 2022, as web debt progress outpaced EBITDA progress.

Environmental, social and governance (ESG) concerns have a impartial to low affect on Hyperlink REIT’s credit standing. The Hyperlink REIT has reasonably unfavourable carbon transition and bodily local weather dangers, that are offset by its low-neutral exposures to governance and social dangers.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

The Hyperlink REIT’s steady ranking outlook displays Moody’s expectation that the belief will take a cautious strategy to its debt-financed acquisitions, avoiding a cloth hostile change in its enterprise combine or monetary leverage.

Hyperlink REIT’s ranking is unlikely to be upgraded for no less than the subsequent 12-18 months. Over the medium time period, upward ranking strain might come up if Hyperlink REIT additional improves (1) its general asset high quality, (2) the size and stability of rental revenue, and (3) its leverage at via a conservative funding technique.

Downward ranking strain might come up if (1) Hyperlink REIT fails to take care of steady operations, or (2) its enterprise and growth dangers are elevated considerably via aggressive debt-financed acquisitions outdoors of its core Hong Kong operations, in order that its adjusted web debt/EBITDA exceeds 7.0x and its adjusted EBITDA/curiosity protection falls beneath 3.0x-3.5x on a sustained foundation.

The first methodology used on this ranking was REITs and different industrial actual property firms printed in September 2022 and out there at https://rankings.moodys.com/api/rmc-documents/393395. Alternatively, see the Scoring Methodologies web page at https://rankings.moodys.com for a duplicate of this technique.

Hyperlink Actual Property Funding Belief was listed on the Hong Kong Inventory Change on November 25, 2005 as a part of a divestment train by the Hong Kong Housing Authority. It operates an inside supervisor mannequin that aligns the pursuits of the individuals and collectors. As of September 30, 2022, the belief had 152 investments throughout all sectors, together with retail, logistics, workplace, parking, and associated companies.

REGULATORY DISCLOSURES

For a extra detailed specification of Moody’s key ranking assumptions and sensitivity evaluation, please seek advice from the Methodology Assumptions and Sensitivity to Assumptions sections of the disclosure kind. Moody’s ranking symbols and definitions could be discovered at https://rankings.moodys.com/rating-definitions.

For rankings issued on a program, collection, class/class of debt, or safety, this announcement supplies sure regulatory disclosures in reference to every ranking of a subsequently issued bond or word of the identical collection, class/class of debt, safety, or compliant to a program for which rankings are derived completely from present rankings in accordance with Moody’s ranking practices. For rankings issued on a help supplier, this announcement supplies sure regulatory disclosures in reference to the help supplier’s credit standing motion and in reference to every specific credit standing motion for securities that derive their credit score rankings from the credit standing of the help supplier. help supplier. For provisional rankings, this announcement supplies sure regulatory disclosures concerning the provisional ranking assigned, and concerning a remaining ranking which may be assigned subsequent to the ultimate issuance of the debt, in every case the place the construction and phrases of the transaction haven’t modified. previous to task of the ultimate ranking in a fashion that will have affected the ranking. For extra data, please seek advice from the issuer web page/respective issuer settlement at https://rankings.moodys.com.

For any affected safety or rated entity that receives direct credit score help from the principal entity(ies) of this credit standing motion, and whose rankings could change on account of this credit standing motion, the related regulatory disclosures might be these of the guarantor entity. There are exceptions to this strategy for the next disclosures, if relevant to the jurisdiction: Ancillary Companies, Rated Entity Disclosure, Rated Entity Disclosure.

The ranking has been disclosed to the rated entity or its designated agent(s) and issued with no change ensuing from such disclosure.

This qualification is requested. See Moody’s Coverage for Designating and Assigning Unsolicited Credit score Scores out there on its web site https://rankings.moodys.com.

Moody’s considers a rated entity or its agent(s) to be concerned when it has a common relationship with Moody’s. Until indicated within the Regulatory Disclosures as a non-participating entity, the rated entity is a participant and the rated entity or its agent(s) typically supplies data to Moody’s for the needs of its ranking course of. Please seek advice from https://rankings.moodys.com for Regulatory Disclosures for every credit standing motion, displayed on the issuer/deal web page, and for Moody’s Coverage for Designating Nonparticipating Rated Entities, displayed on https://rankings.moodys.com.

The regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking overview.

Moody’s common rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation could be discovered at https://rankings.moodys.com/paperwork/PBC_1288235.

The World Scale Credit score Score on this Credit score Score Announcement was issued by considered one of Moody’s associates outdoors the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Primary 60322, Germany, pursuant to Artwork. .4 paragraph 3 of Regulation (EC) No. 1060/2009 on Credit score Score Businesses. Extra data on the standing of the EU help and on the Moody’s workplace that issued the credit standing is accessible at https://rankings.moodys.com.

The World Scale Credit score Score on this Credit score Score Announcement was issued by considered one of Moody’s associates outdoors of the UK and is endorsed by Moody’s Traders Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA in accordance with relevant legislation to credit standing businesses within the UK. . Extra data on the standing of the UK endorsement and on the Moody’s workplace that issued the credit standing is accessible at https://rankings.moodys.com.

Please seek advice from https://rankings.moodys.com for updates on modifications to the lead rankings analyst and the Moody’s authorized entity that issued the ranking.

See the issuer/settlement web page at https://rankings.moodys.com for added regulatory disclosures for every credit standing.

The primary identify beneath is the lead ranking analyst for this Credit score Score and the final identify beneath is the first individual chargeable for approving this Credit score Score.

Stephanie Lau
Vice President – Senior Mortgage Officer
Company Finance Group
Moody’s Traders Service Hong Kong Ltd.
24/F One Pacific Place
88 queen highway
Hong Kong,
China (Hong Kong SAR)
JOURNALISTS: 852 3758 1350
Buyer Service: 852 3551 3077

chris park
Affiliate Managing Director
Company Finance Group
JOURNALISTS: 852 3758 1350
Buyer Service: 852 3551 3077

launch workplace:
Moody’s Traders Service Hong Kong Ltd.
24/F One Pacific Place
88 queen highway
Hong Kong,
China (Hong Kong SAR)
JOURNALISTS: 852 3758 1350
Buyer Service: 852 3551 3077

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