Moody's affirms Hutchison Whampoa A3 Rtg

May 12, 2004

Moody's Investors Service has affirmed the A3 debt rating for Hutchison Whampoa (Hutchison) in response to the proposed disposal of its 20% stake in Proctor & Gamble-Hutchison (P&G-H) for USD2 billion. The rating outlook remains negative. P&G-H, a joint venture between Hutchison and Proctor & Gamble (P&G), is engaged in manufacturing and distributing consumer products in China. Subsequent to the disposal, P&G will become the sole owner of P&G-H.

The rating affirmation reflects Moody's view that the cash proceeds of USD2 billion, to be received upon completion of the transaction in June 2004, will moderately enhance Hutchison's financial flexibility. Moody's understands the disposal will have minimal impact on Hutchison's recurring operating cash flow. The rating agency also recognizes that the disposal further demonstrates Hutchison's ability to monetize some of the hidden value in its balance sheet.

However, the rating outlook remains negative, reflecting concerns that the peak funding requirements and start-up losses associated with Hutchison's 3G operations continue to pressure its cash flow coverage ratios. Nevertheless, the company's large liquidity reserve significantly mitigates any near-term financial risks.

Moody's will continue to closely monitor the revenues and earnings growth of Hutchison's 3G operations. Any developments indicating possible significant revenue shortfalls or cost overruns would pressure the rating. Furthermore, rating pressure would emerge with any event that has the potential to undermine Hutchison's liquidity reserve.