THE Mass Transit Railway Corp (MTRC) is facing a possible downgrade on its Hong Kong dollar-denominated debt due to China's increasing influence in the territory, international credit rating agency Moody's Investors Service says.
Moody's attributed the rating review to ''Hong Kong's accelerated pace of integration into China, and the implications of such integration on the monetary and financial trends in the territory''.
It said: ''The ultimate sovereign power over the territory's institutions - including the monetary and financial framework - will reside with China.'' The impact of such integration would be keenly felt even before the July 1997 ''as Hong Kong's economy becomes increasingly linked to that of China, as China takes more explicit interest in Hong Kong's internal decisions''.
The MTRC has a Aa2 rating on its Hong Kong-dollar debt, which is four notches higher than its A3 rating on its long-term foreign currency debt. It has a Prime-1 rating on its short-term debt.
MTRC finance director Roger Moss said: ''Such a review has nothing to do with the financial strength of the MTRC. It relates to Hong Kong's long-term obligations and its relation to China.'' Moody's recently upgraded China's foreign currency debt from Baa1 to A3, in line with Hong Kong's.
It is a general rule that no issuer can have an official rating higher than its country's sovereign rating.
Mr Moss said even if there was a downgrade, it would not affect the company's financing programme nor its cost of financing.
