Revised ACF structure may weaken AAHK credit profile - S&P

    Standard & Poor's Ratings Services said today that the revised Airport Construction Fee (ACF) structure and updated debt-financing plans for the three-runway system (3RS) of Airport Authority Hong Kong (AAHK; AAA/Stable/--; cnAAA/--) should lead to an increase in financial leverage for AAHK, and it could materially weaken the company's stand-alone credit profile (SACP).
  That said, the credit rating agency expects the issuer credit rating (ICR) on AAHK will be unaffected by the company's new proposal for financing arrangement for the 3RS. The absence of a rating impact on AAHK primarily reflects the ICR on AAHK being equalized with the sovereign credit rating on Hong Kong (Special Administrative Region) (AAA/Stable/A-1+;
cnAAA/cnA-1+), based on S&P's continued expectation that the company will continue to receive "almost certain" extraordinary support from the government in the event of financial distress.
  Excluding the extraordinary government support, AAHK's current SACP is 'aa-', reflecting, among other things, a two-notch downward status from the ICR based on the increased leverage that the company would take on for the 3RS project in the near to medium term. We expect that the increased cash flows from the ACF since the start of construction and the retained earnings from fiscal 2015 would partially compensate for the impact of the additional project-related debt increase, thereby maintaining the ratio of FFO to debt at or above 25% before 2020.