Fitch may up Kowloon-Canton

Fitch Ratings said it placed Kowloon-Canton Railway Corp.'s long-term local-currency issuer default rating of AA on Rating Watch positive, and affirmed its long-term foreign-currency issuer default rating at AA- with positive outlook and its short-term rating at F1+.

The Rating Watch reflects Fitch's view that a pending merger with Mass Transit Railway Corp. reduces the company's operational risks given the higher predictability of cash inflows from Mass Transit Railway and the expectation that the Hong Kong government will pursue maintenance of a robust operational and financial profile for Mass Transit.

The watch will be resolved, likely with a one-notch upgrade of Kowloon-Canton's local-currency issuer default rating, after the completion of the merger, which is anticipated before the end of 2007, Fitch said.

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