Temasek, Paulson backing Hutchison's port assets spin-off
Singapore sovereign wealth fund Temasek Holdings and US hedge fund manager Paulson & Co are cornerstone investors in Hutchison Whampoa's port spin-off in Singapore, the largest listing in Southeast Asia.
Hong Kong tycoon Li Ka-shing's conglomerate could raise almost US$6 billion by floating its Hong Kong and Shenzhen port and related assets in a business trust, Hutchison Port Holdings Trust.
Apart from Temasek and Paulson, the other major cornerstone investor is Taiwan-listed Cathay Life Insurance. Between them, the eight cornerstone investors are putting in a total of US$1.62 billion.
Paulson will inject US$350 million in the IPO, and a Temasek unit and Cathay Life will each put in US$100 million.
According to its preliminary prospectus, Hutchison Port Holdings has been priced at an indicative range of 91 US cents to US$1.09 per unit, for a possible range of up to US$5.2 billion to US$5.8 billion.
The listing of one of Hutchison Whampoa's most profitable assets could reduce the group's net debt by as much as 30 per cent at the outset, according to a report by rating agency Moody's last month.
Hutchison Whampoa's net debt as of June 30 last year, was US$19 billion and its net debt to net capitalisation ratio was over 30 per cent, Moody's said. The group wants to trim the ratio to the low-to-mid-20 per cent range. The IPO would also allow Hutchison Whampoa's partner, Singapore terminal operator PSA International, which has stakes in the group's port assets, to cash in.
Hutchison Whampoa's holding in the Singapore-listed company would be cut to about 25 per cent following the listing.
The rating agency said that the reduction in ownership would decrease Hutchison Whampoa's share of future profit and cashflow. But Moody's said that the dividend stream it would receive from the trust would offset the cutback in revenue.
Revenues from the trust assets was about US$1.3 billion for 2009, constituting 5 per cent of Hutchison Whampoa's total revenue and gross earnings came to about US$800 million, making up 17 per cent of Hutchison Whampoa's total earnings.
Apart from repaying debt, the company could also use the proceeds for acquisitions relating to ports and other businesses, according to the prospectus.
In January, Hutchison Whampoa confirmed a HK$5.7 billion deal to buy port and property assets from China Resources (Holdings).
The company chose Singapore over Hong Kong because the city has only regulations covering real estate investment trusts and not other types of trusts.
Hutchison Whampoa said it would consider an additional listing on the Hong Kong bourse later if the regulatory environment changed.
Eight cornerstone investors are supporting the spin-off to the tune of, in US dollars, $1.62b