Moody's may downgrade HKT

Moody's Investors Service said it continues its review for possible downgrade on the Baa2 ratings of Hong Kong Telecommunications Ltd. (HKT) and all entities irrevocably and unconditionally guaranteed by it following news of PCCW Ltd.'s 2011interim results.

PCCW is the 100% shareholder in Hong Kong Telecommunications Group Holdings Ltd. (HKT Group), which in turn wholly owns HKT.

HKT and HKT Group are the unconditional guarantors for bonds outstanding totaling $2.5 billion, Moody's said.

Notwithstanding the uncertainties surrounding the proposed business trust structure, Moody's noted that PCCW's 2011 interim results did not provide any evidence of deleveraging.

As a result, should the plans for the business trust structure be aborted or timing be delayed beyond the anticipated closing date of the fourth quarter of 2011, the agency said it would close the review and most likely downgrade its Baa2 ratings to Baa3.

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