Hong Kong MTR Corp’s creditworthiness downgraded on soft property market, funding needs

S&P says MTR Corp’s operational and rental recovery from the pandemic could take longer than it previously expected

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As well as rail operations, the MTR Corporation also develops, manages and rents out residential and commercial projects. Photo: Edmond So

Published: 11:09pm, 28 Aug 2024Updated: 12:06am, 29 Aug 2024

A rating agency has downgraded the creditworthiness of Hong Kong’s rail operator because of the city’s sluggish property market and the firm’s rising funding needs for future railway projects.

S&P Global Ratings on Wednesday cut the MTR Corporation, majority owned by the Hong Kong government, from “aa-” to “a+”, for its stand-alone credit profile, despite affirming its “AA+/A-1” issuer credit ratings.

According to the US agency, the profile is a component of a rating and refers to its opinion of an issue’s or issuer’s creditworthiness, in the absence of extraordinary intervention from its parent or affiliate or related government.

The rating agency said it expected the MTR Corp’s capital expenditure would increase annually to HK$16 billion to HK$22 billion (US$2.1 billion to US$2.8 billion) between this year and 2026 for its new railway projects.

“We expect the MTR Corp’s capital expenditure needs to increase as its property development cash flow may stay muted,” S&P said.

“Its operational and rental recovery from the pandemic could take longer than we previously expected.”