Standard & Poor's has warned that its credit ratings for MTR Corp (MTRC) and Kowloon-Canton Railway Corp (KCRC) could come under pressure as the government discusses the merger of the two railway companies.
It said they are vulnerable to a number of factors, specifically to changes in the regulatory environment and to a decline in government support.
Weaker ratings would mean the two, Hong Kong's largest corporate borrowers with combined debts of about HK$50 billion in 2001, would face higher funding charges.
Standard & Poor's director John Bailey said the agency saw no immediate changes in the corporations' credit ratings, but it was closely monitoring the situation. Both enjoy a AA-minus credit rating because the government controls about 77 per cent of MTRC and 100 per cent of KCRC.
'It's important that the government's support in property subsidies or equity infusions, is always integral to these companies,' Mr Bailey said.
The international credit rating agency said yesterday the government was likely to integrate the corporations into a rail giant to ease its swelling deficit and facilitate the sale of its second tranche of MTRC shares. 'When you look at the financial profile on a stand-alone basis that is somewhat lacklustre, they are much lower as a rating,' Mr Bailey said.
