20160901-穆迪服务-CreditOutlook_Credit_Impilcations_of_Current_Events_20页_1mb

Credit Outlook Summary

Core Content

This document provides an overview of credit implications arising from recent events in the corporate, infrastructure, banking, sovereign, and sub-sovereign sectors. It highlights both credit-positive and credit-negative developments, analyzing their impact on financial stability and credit ratings.

Main Points and Key Information

Corporates

• USG's Planned Sale of L&W Supply Reduces Debt

  • USG sold its L&W Supply unit for $670 million to reduce debt and improve credit metrics.
  • The sale will result in pro forma EBITA margins of nearly 20%, up from 14%.
  • Interest coverage will improve to 4.0x from 2.9x, and debt/EBITDA will decline to 2.3x from 3.5x.
  • The move allows USG to focus on higher-margin manufacturing and increase capital expenditures.

• Clayton Williams' Debt Tender and Equity Placement Reduce Leverage

  • Clayton Williams accepted tenders for $131.5 million of senior notes and completed an equity placement of $150 million.
  • This reduces leverage and improves liquidity, with the company having $256 million in available liquidity as of June 30.
  • The company also sold non-core assets for $19.5 million, enhancing its ability to monetize assets.
  • The company's leverage is expected to weaken further if it continues to pay interest in kind on its second-lien term-loan.

Infrastructure

• Ohio Regulatory Order Implementing Rate Plan Is Credit Positive for DP&L
  • DP&L received approval to re-implement ESP I, which is credit positive.
  • The new rate plan eliminates the controversial service stability rider (SSR) and reduces financial strain.
  • The modification to ESP I helps maintain credit quality until the next rate plan (ESP III) takes effect.
  • The reform is expected to allow DP&L to return to a 50% debt-to-rate-base capital structure in the next few years, potentially rising to 75% if generation assets are separated.

Banks

• DNB and Nordea Will Combine Baltic Operations, Creating Efficiencies
  • The joint venture will create a loan book of around €13 billion, making it the second-largest lender in the Baltic countries.
  • The merger is expected to improve operational efficiencies and profitability, particularly in Estonia, Latvia, and Lithuania.
  • DNB and Nordea have historically lower returns on assets in the region due to large branch networks.
  • The combined operations will improve portfolio diversification and pricing power.

Sovereigns

• Colombia's Peace Agreement with FARC Ends a 52-year Credit-Negative Conflict
  • The peace agreement is expected to be ratified and accepted in the national plebiscite, which is credit positive.
  • The agreement will lead to increased infrastructure and agriculture investment, boosting GDP growth by about 1 percentage point annually.
  • However, fiscal deficits are expected to rise to 3.9% of GDP in the short term due to the costs of post-conflict development.
  • The government plans to implement structural tax reform to reduce the fiscal deficit over the coming years.

Sub-sovereigns

• Toronto and Ottawa Will Benefit from Canada's Transit Infrastructure Stimulus

  • The federal government allocated CAD1.49 billion for transit infrastructure, with CAD500 million going to Toronto and CAD156 million to Ottawa.
  • This funding allows the cities to complete more projects with less local financing, reducing future debt and reserve usage.
  • Toronto has a significant backlog of transit projects, estimated at CAD3.9 billion in 2015, expected to decline by 20% over 10 years.
  • Ottawa will use the funding to support the second phase of its LRT development.

• China's Intra-Governmental Fiscal Reform Will Reduce Regional and Local Government Deficits

  • The reform will shift spending responsibilities from regional and local governments (RLGs) to the central government.
  • Wealthier RLGs such as Shanghai and Beijing will benefit the most as they will see a reduction in spending obligations.
  • Poorer RLGs like Qinghai and Xinjiang will see less benefit due to reduced transfers from the central government.
  • The reform aims to reduce RLGs' expenditures in education and social security, which accounted for 30% of their total budget in 2015.

Recent Developments

• The document references recently published articles in the Credit Outlook and invites readers to access the Weekly Market Outlook for additional insights.

Summary of Credit Impacts

This summary highlights the credit implications of various developments across different sectors, focusing on the positive and negative impacts on financial stability and credit ratings.