Beijing Enterprises Holdings Ltd. -- Moody's: Beijing Enterprises' sale of asset is credit positive

But, the sale will not have any immediate impact on Beijing Enterprises' Baa1 issuer rating and the Baa1 rating on its USD1.8 billion senior notes, which were issued by special purpose vehicles and guaranteed by Beijing Enterprises .

The ratings outlook remains stable.

"The cash consideration will somewhat strengthen the company's liquidity profile," says Ivan Chung, a Moody's Vice President and Senior Credit Officer.

On 16 November 2012, Beijing Enterprises said that it will sell its 100% stake in BE (Motorway) -- which currently holds a 96% equity interest in Capital Expressway Company -- to Shi Hong Investments Limited, an indirectly wholly owned subsidiary of Beijing Enterprises Group.

Capital Expressway controls the operation rights for constructing, operating and managing Beijing Capital Airport Expressway.

Beijing Enterprises expects to recognize a book gain of about RMB150 million (approximately HKD185 million) from the sale. Of the total cash consideration of HKD1.37 billion, HKD270 million will be settled upon the completion date and the remaining will be paid from 6 months to 2.5 years after the completion day.

On the other hand, the government has adjusted its toll policy for Beijing Capital Airport Expressway and it drastically reduced its toll on 1 October 2009 as well as on 1 July 2011. Consequently, the revenue contribution from this toll road is limited and has already been factored into Moody's projection.

In 2011, the toll revenue stood at HKD234 million and the related profit attributable to shareholders was HKD6.27 million, and which accounted for 0.77% and 0.23% of Beijing Enterprises' total revenue and segment profit for 2011, respectively.

As such, the sale of Beijing Capital Airport Expressway will have an insignificant impact on Beijing Enterprises' current and projected revenue and earnings.

In contrast, the HKD1.37 billion cash consideration, settled by installments over the next 2.5 years, will somewhat strengthen the company's liquidity profile.

Beijing Enterprises' ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's: (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk.

Moody's compared these attributes with other issuers both within and outside Beijing Enterprises' core industry and believes the ratings are comparable to those of other issuers with similar credit risk.

Other factors used in this rating are described in Analytical Considerations in Assessing Conglomerates, published in September 2007.

Beijing Enterprises Holdings Limited was founded in 1997 by the Beijing municipal government and is listed on Hong Kong Stock Exchange. It is controlled by Beijing Enterprises Group, which is 100% owned by the Beijing municipal government and supervised by Beijing State-owned Assets Supervision and Administration Commission.

Beijing Enterprises is an investment holding company. It operates through three key business segments: pipeline gas operations, beer brewing, and sewage and water treatment services. As of 2011, total sales amounted to HKD30.4 billion with net income of HKD3.7 billion.

Ivan Chung VP - Senior Credit Officer Project & Infrastructure Finance 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) Patrick Mispagel Associate Managing Director Project & Infrastructure Finance JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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