Fitch Downgrades Hong Kong's MTR to 'AA-' on Sovereign Rating Action; Outlook Stable

MTR

24/04/2020 10:27

(The following statement was released by the rating agency)


Fitch Ratings-Hong Kong-April 24: 

Fitch Ratings has downgraded Hong Kong-based rail transit network operator MTR 
Corporation Ltd's (MTRC) Long-Term Foreign- and Local-Currency Issuer Default 
Ratings (IDR) to 'AA-' from 'AA' with a Stable Outlook after similar rating 
action on the sovereign. The agency has also downgraded MTRC's senior unsecured 
rating to 'AA-' from 'AA' and affirmed MTRC's Short-Term Foreign-Currency IDR at 
'F1+'.

Key Rating Drivers

The rating actions follow the downgrade of Hong Kong's ratings. For details, see 
Fitch Downgrades Hong Kong to 'AA-' from 'AA'; Outlook Stable, dated 20 April 
2020, at http://www.fitchratings.com/site/pr/10118880.

Derivation Summary

MTRC's ratings are assessed under Fitch's Government-Related Entities Rating 
Criteria. Fitch believes that the Hong Kong government has a very high incentive 
to provide extraordinary support to the company, if needed. We have also 
factored in the Hong Kong government's control and support, MTRC's 
public-service function as a sole operator of the Hong Kong mass transit rail 
network, as well as the impact of a default on the government.

RATING SENSITIVITIES

Factors That Could, Individually or Collectively, Lead to Positive Rating 
Action/Upgrade:

- Positive rating action on the Hong Kong sovereign, in conjunction with 
continued strong government support, would result in a similar change in MTRC's 
ratings. 

Factors That Could, Individually or Collectively, Lead to Negative Rating 
Action/Downgrade:

- A sovereign downgrade, significant changes leading to a dilution of government 
links or control or weaker socio-political and financial implications of a 
default may lead to negative rating action.

Any rating action on MTRC's IDR would result in similar rating action on its 
senior unsecured rating.

Best/Worst Case Rating Scenario

International scale credit ratings of Public Finance issuers have a best-case 
rating upgrade scenario (defined as the 99th percentile of rating transitions, 
measured in a positive direction) of three notches over a three-year rating 
horizon; and a worst-case rating downgrade scenario (defined as the 99th 
percentile of rating transitions, measured in a negative direction) of three 
notches over three years. The complete span of best- and worst-case scenario 
credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and 
worst-case scenario credit ratings are based on historical performance. For more 
information about the methodology used to determine sector-specific best- and 
worst-case scenario credit ratings, visit 
https://www.fitchratings.com/site/re/10111579.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the 
Applicable Criteria.

ESG Considerations

ESG issues are credit neutral or have only a minimal credit impact on the 
entity(ies), either due to their nature or the way in which they are being 
managed by the entity(ies). For more information on Fitch's ESG Relevance 
Scores, visit www.fitchratings.com/esg.

MTR Corporation Ltd; Long Term Issuer Default Rating; Downgrade; AA-; RO:Sta

----; Short Term Issuer Default Rating; Affirmed; F1+

----; Local Currency Long Term Issuer Default Rating; Downgrade; AA-; RO:Sta

----senior unsecured; Long Term Rating; Downgrade; AA-

Contacts: 

Primary Rating Analyst

Janet Liu, 

Director

+852 2263 9983

Fitch (Hong Kong) Limited

19/F Man Yee Building 60-68 Des Voeux Road Central

Hong Kong

Secondary Rating Analyst

Kelvin Tsui, CFA, FRM

Senior Director

+852 2263 9965

Committee Chairperson

Christophe Parisot, 

Managing Director

+33 1 44 29 91 34

 

Media Relations: Alanis Ko, Hong Kong, Tel: +852 2263 9953, Email: 
alanis.ko@thefitchgroup.com; Wai Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: 
wailun.wan@thefitchgroup.com.

Additional information is available on www.fitchratings.com

Applicable Criteria 

Government-Related Entities Rating Criteria (pub. 13 Nov 2019) 

https://www.fitchratings.com/site/re/10099139

Public Sector, Revenue-Supported Entities Rating Criteria (pub. 27 Mar 2020) 
(including rating assumption sensitivity)

https://www.fitchratings.com/site/re/10115163

Additional Disclosures 

Dodd-Frank Rating Information Disclosure Form 

https://www.fitchratings.com/site/dodd-frank-disclosure/10119240

Solicitation Status 

https://www.fitchratings.com/site/pr/10119240#solicitation

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https://www.fitchratings.com/site/pr/10119240#endorsement_status

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https://www.fitchratings.com/regulatory

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