Kowloon Motor Bus Holdings' franchised bus division has been assigned a single A credit rating by ratings agency Standard & Poor's. The rating is only one level below the SAR's double-A sovereign rating and the ratings of other transport giants - MTR Corp and Kowloon-Canton Railway Corp. Standard & Poor's said the rating underlined Kowloon Motor Bus' (KMB) stable business, efficient services, flexible capital expenditure and sound financial health. Susanne Ho, head of KMB corporate communications, welcomed the rating. However, she would not say if the firm would raise debt. The rating has been assigned while the low interest-rate regime favours debt issues. KMB appeared to need to raise debt as the ratings agency pointed out that 94 per cent of its debt was due before 2006, while it relied heavily on short-term debt. In addition, the company's debt consisted of variable rate bullets at the Hibor (Hong Kong interbank offered rate) plus a credit spread, it said. 'Changes in interest rates in any given year can have a significant impact on KMB's finance costs,' it said. KMB, formed 69 years ago, is the largest transport operator in Hong Kong. It has 72 per cent of the franchised bus market and 27 per cent of the public transport market. The company's franchise is due to expire in 2007. Standard & Poor's said: 'KMB benefits from a supportive regulatory environment, which allows a reference rate of return on average net fixed assets of 13 per cent.' The company, which carries passengers across Victoria Harbour and within Kowloon and the New Territories, is facing escalating competition. Fuelling competition is the Government's strong support for a railway-based public transport network.