Fitch affirms MTR

Fitch Ratings said it affirmed Hong Kong-based MTR Corp. Ltd.'s AA- senior unsecured foreign currency debt rating, F1+ short-term foreign currency debt rating and AA+ senior unsecured local currency debt rating.

The outlook is stable.

MTR's credit metrics are healthy and in line with peers of similar ratings, with funds from operations to adjusted net leverage of 5.9x during the first half of 2005 and FFO to gross interest coverage of 3.9x for the same period, the agency said.

Fitch's rating concern centers on MTR's involvement in railway projects in Shenzhen and Beijing. Despite its track record in Hong Kong, MTR has no material experience in running rail lines in a different demographic and regulatory environment.

However, these risks are mitigated by the manageable size of investment requirement from MTR (approximately HK$3 billion) and the favorable demographics at both project locations, the agency said.

The proposed merger with Kowloon-Canton Railway Corp. (AA-/stable/F1+), which is still under discussion, has not been factored into the ratings as the eventual structure is not yet known. That said, Fitch said it expects government support for the merged entity to be no weaker than its current form

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