Moody’s rates HKT Capital notes Baa2

Moody’s Investors Service said it assigned a Baa2 rating to HKT Capital No. 1 Ltd.’s proposed dollar-denominated senior unsecured zero coupon notes due 2030.

The outlook is stable.

HKT Capital No. 1 is a direct and wholly-owned subsidiary of Hong Kong Telecommunications (HKT) Ltd., Moody’s said.

The proposed notes will be irrevocably and unconditionally, jointly and severally guaranteed by Hong Kong Telecommunications and its parent, HKT Group Holdings Ltd., the agency said.

The bond proceeds will be used primarily to refinance existing debt, the agency said.

While the group has paid down its debt by using cash proceeds from its rights issue in July 2014, its adjusted debt-to-EBITDA ratio is likely to remain in the 3.0x to 3.5x range over the next 12 months, Moody’s said.

Furthermore, this pre-financing will cause a temporary spike in HKT’s leverage as of June 2015 if the proceeds are not used to pay down debt imminently, the agency added.

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