S&P slashes Swire Pacific credit rating
United States credit-rating agency Standard & Poor's (S&P) has slashed Swire Pacific's long-term corporate credit rating by one notch to A minus, citing the 'challenging environment for property and aviation activities'.
The senior unsecured debt rating of Swire Pacific International was cut to A minus from A, while the subordinated debt rating of Swire Pacific Offshore Financing was lowered to BBB minus from A plus.
S&P said the outlook on the ratings was negative.
This view, however, contradicted the agency's May report on Swire Pacific, in which it said the company was well-positioned to withstand property and tourism downturns.
'The downgrade reflects increasing pressure on the company's earnings stemming from the challenging business environment for property and aviation,' it said.
'In light of uncertain prospects for recovery in price levels and demand, the profitability of Swire Pacific's property-development business is expected to decline sharply in the near to medium term.' The rating agency said cash flows from rental properties would be more resilient, but it said 'pressure will likely grow in the next few years, especially in the Hong Kong East area'.
It also said contributions from 'associated aviation operations, mainly Cathay Pacific Airways, are likely to remain very meagre over the medium term as price-based competition in the industry intensifies'.