Hutchison Whampoa Ltd (HWL) has hired Goldman Sachs Group Inc to sell perpetual hybrid dollar notes, according to a person familiar with the matter Wednesday.

Hutchison, which has $21.4 billion of bonds maturing between now and the end of 2049, has sold one perpetual dollar bond before, according to data compiled by Bloomberg. The $1 billion of notes issued by its Cheung Kong Infrastructure unit in September pay a 6.625 percent coupon, the data show. HWL will use the proceeds for debt repayment and other corporate purposes.

A perpetual note is a security with no maturity date that is callable at the issuer's discretion. While coupon payments are mandatory, the bond's principal doesn't have to be paid back, meaning it can be considered equity and used as leverage with no dilution effect on shareholders.

Hutchison joins Hong Kong peer Noble Group Ltd in planning perpetual dollar bonds. Noble, the commodities supplier that counts China's sovereign wealth fund as a shareholder, said in a stock exchange filing Tuesday that it hired banks for a sale.

Hutchison's notes, which will be senior only to the company's shares, were assigned an expected "BBB" rating by Fitch Ratings, the risk assessor's second-lowest investment-grade ranking. The notes can be bought back in October 2015 and will become floating-rate paying an additional 100 basis points of interest in October 2020 if not already redeemed, Fitch said.

Standard & Poor's, which assigned a "BBB" long-term issue rating to the proposed perpetual capital securities issue, said the issue shows Hutchison Whampoa's "commitment to de-leveraging by raising equity capital and maintaining its strong liquidity."

S&P said in a statement that it had assigned "intermediate" equity content to the notes. "This means that we will treat 50 percent of the principal as equity and 50 percent of the distributions as dividends in our financial ratio calculations."

"This securities issue, if successful, together with the $1 billion perpetual capital securities issued by its 85 percent owned subsidiary Cheung Kong Infrastructure Holdings Ltd, should improve HWL's consolidated leverage, measured by unadjusted net debt to net capital, toward our target of below 30 percent over the next two years," the rating agency said.

Hutchison Whampoa's Hong Kong-based spokesman Hans Leung declined to comment on the company's latest funding arrangements.

Bloomberg

(HK Edition 10/21/2010 page3)