OREANDA-NEWS. Fitch Ratings has affirmed CK Hutchison Holdings Limited's (CKHH) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A-' with a Stable Outlook, and foreign-currency senior unsecured rating at 'A-'. A full list of rating actions is at the end of this release.

KEY RATING DRIVERS

Diversified Business, Stable Cash Flow: CKHH's ratings reflect its strong business profile

And geographical diversification, and stable cash flow generation from high-quality ports,

Retail, telecommunications, infrastructure and energy businesses. No single business division

Accounted for more than 35% of pro forma EBITDA in 2015. The infrastructure and

Ports businesses (together 48% of pro forma EBITDA in 2015) provide visible, recurring cash

Flows.

Capital-Intensive Business: CKHH's infrastructure, ports and telecommunications businesses are capital-intensive and push up leverage, which constrains the overall ratings. There is also an element of structural subordination of cash flows, especially in the utilities-infrastructure assets, given the level of debt at the asset-owning level and that the operating cash flows of these businesses can only be accessed via dividends.

European Telecoms' Positive Free Cash Flow: Fitch expects CKHH's European telecom operations to remain free cash positive in general over the medium term. 3 Group Europe posted positive free cash flow (EBITDA after capex and licence fees) since 2014 after a number of years of cash drain; only Italy within CKHH's European operations suffered negative free cash flow after capex and licence fees.

CKHH's potential acquisition of O2 UK from Telefonica SA (BBB+/Stable) did not complete as it was blocked by the EU competition authorities. The merger would have significantly enhanced 3 Group Europe's UK business (3UK) in terms of scale, operational efficiencies and overall competitive positioning within the UK market. Nevertheless, we expect 3UK to maintain its profitability over the current ratings horizon. In our base-case expectations, we have assumed that the merger of 3 Italy and Vimpelcom's Italian operation, Wind Telecom S. p.A (Wind), to be completed by end-2016 in a non-cash joint-venture format as proposed by the company.

Stable Financial Profile: We expect CKHH's financial profile to remain stable, with FFO-adjusted net leverage remaining below 4.0x in 2016-2018 barring significant debt-funded acquisitions or a major increase in dividend payments. CKHH's reported financial performance is exposed to the effects of currency volatility, as seen in 2015. The company mitigates such risks, however, through broadly matching the denomination of debt with the currency of its underlying assets. Our financial forecasts also factor in no dividends from Husky Energy in 2016-2018, given the cash flow-management initiatives of this company amid the low oil and gas price environment.

Strong Liquidity; Access to Funding: CKHH's ratings are also supported by its robust liquidity profile and ease of access to capital. Reported cash and cash equivalents were HKD131bn at end-2015, and debt maturities are also well-laddered. Fitch expects the company to retain strong access to capital markets for its refinancing needs.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:

- Moderate Fitch-adjusted revenue growth in 2016-2017

- Fitch-adjusted EBITDA margins of around 20% in 2016-2017

- Wind transaction in Italy completes in 2016

- Dividend payout ratio of 30%-40% in 2016-2017

- No acquisitions or disposals

RATING SENSITIVITIES

Negative: Developments that may, individually or collectively, lead to negative rating action include:

- FFO-adjusted net leverage exceeding 4.0x on a sustained basis;

- Substantially negative free cash flow after acquisitions and disposals;

- Significant change in business mix and capital structure management that are adverse to its credit risk profile;

- A weakening quality or decreased quantity of recurring cash flows.

No positive rating action is expected in the near term due to CKHH's business profile.

FULL LIST OF RATING ACTIONS

CK Hutchison Holdings Limited

Long-Term Foreign-Currency IDR affirmed at 'A-'; Outlook Stable

Senior unsecured rating affirmed at 'A-'

CK Hutchison Finance (16) Limited

Ratings on all senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa Europe Finance (12) Limited

Ratings on all senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa Finance (06) Limited

Ratings on senior unsecured bond affirmed at 'A-'

Hutchison Whampoa Finance (09) Limited

Ratings on senior unsecured bond affirmed at 'A-'

Hutchison Whampoa Finance CI Limited

Ratings on all senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa Finance UK PLC

Ratings on all senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa International (03/33) Limited

Ratings on senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa International (09) Limited

Ratings on senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa International (09/19) Limited

Ratings on senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa International (10) Limited

Ratings on subordinated bonds affirmed at 'BBB'

Hutchison Whampoa International (11) Limited

Ratings on all senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa International (12) (II) Limited

Ratings on all senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa International (12) Limited

Ratings on subordinated bonds affirmed at 'BBB'

Hutchison Whampoa International (14) Limited

Ratings on all senior unsecured bonds affirmed at 'A-'

Hutchison Whampoa Europe Finance (13) Limited

Ratings on subordinated bonds affirmed at 'BBB'

Hutchison Whampoa Finance (14) Limited

Ratings on senior unsecured bonds affirmed at 'A-'

Fitch adjustments include Fitch-adjusted EBITDA, which is reported EBITDA, less EBITDA contribution from associates and JV's, plus dividends from associates and JVs.