20170109-穆迪服务-Credit_Implications_of_Current_Events_26页_1mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications of current events across various sectors including Corporates, Infrastructure, Banks, Insurers, Asset Managers, and Exchanges. It outlines the credit impacts of business decisions, economic conditions, and regulatory changes on different entities.

Main Points by Sector

Corporates

• Phillips 66 and Spectra Energy: Benefited from DCP's reorganization. The reorganization allowed them to receive up to $300 million in distributions and IDR payments in 2017. However, the credit impact on these large companies is minimal due to their size.
• Macy's: Faced a credit negative due to declining holiday sales and a 5% reduction in full-year earnings forecast. The company also cut 10,000 jobs (6% of workforce) and is restructuring to cut costs by $550 million. The company's leverage ratio remains above target, and a downgrade to Baa1 is possible if debt/EBITDA remains above 3.0x or EBITA/interest expense falls below 4.75x.
• MERLIN Properties: Credit positive due to the sale of its non-core hotel portfolio for €535 million, which helps reduce leverage and finance core assets. The company aims to reduce leverage to 45% by 2018 and has already reduced it from 51.2% in 2015 to 47.8% in 2016.
• Evergrande: Credit positive from a proposed equity issuance of RMB30 billion, which will help control debt growth. The leverage ratio is expected to improve from 29% to 45%-55% over the next 12-18 months. The company also has a performance undertaking for Hengda to ensure profitability and dividend distribution.
• Yingde Gases: Credit positive from repaying an HKD820 million offshore bank loan. However, the repayment was funded by short-term borrowing, indicating ongoing liquidity risk. The company still faces refinancing challenges and shareholder disputes.

Infrastructure

• Utilities: Credit negative due to vulnerability to cyber attacks. A successful attack could cause major service disruptions and economic costs. BED's incident highlights this risk, and while the company's response is credit positive, the sector as a whole is exposed to increasing threats.

Banks

• Basel 3 Delay: Credit negative for banks due to the delayed completion of Basel 3 reform. The uncertainty around the general floor for risk-weighted assets (RWAs) may lead to higher funding costs and reduced investor confidence.
• Turkey's Macroeconomic Pressures: Credit negative for Turkish banks due to high inflation, currency depreciation, and security issues. Consumer loans and credit cards are significantly affected, with nonperforming loans (NPLs) expected to rise above 4% by year-end, reducing profitability.
• Nordea's Merger: Credit positive due to simplification of group structure and enhanced capital and liquidity management flexibility. The merger has no immediate impact on the balance sheet, liquidity, or capital, but is expected to reduce costs and help mitigate profitability pressures from low interest rates.

Insurers

• The Hartford: Credit positive due to a reinsurance agreement that mitigates earnings volatility.
• China's Insurers: Credit positive due to tighter shareholding management and curtailment of short-term savings products, which may improve financial stability.

Asset Managers

• FIL: Credit positive from its business expansion into China, which could drive growth and improve financial performance.

Exchanges

• Euronext: Credit positive from the proposed acquisition of LCH.Clearnet, which may enhance its market position and operational capabilities.

Key Information

• Credit Positive Events: DCP reorganization, MERLIN's asset sale, Evergrande's equity issuance, The Hartford's reinsurance agreement, China's regulatory changes, FIL's expansion into China, and Euronext's proposed acquisition.
• Credit Negative Events: Macy's declining sales, Turkey's macroeconomic and security issues, and the vulnerability of utilities to cyber attacks.
• Leverage and Liquidity Concerns: Several companies face leverage and liquidity challenges, with potential downgrades if these issues persist.
• Regulatory and Structural Changes: The delayed Basel 3 reform and Nordea's merger are examples of how regulatory and structural changes can impact creditworthiness.
• Market Trends: E-commerce growth, job cuts, and restructuring efforts are key factors influencing corporate credit ratings.

Conclusion

The document outlines a mix of credit positive and negative developments across different sectors. While some companies benefit from reorganization, asset sales, and regulatory changes, others face declining sales, liquidity risks, and heightened exposure to cyber threats. The overall credit outlook is influenced by macroeconomic conditions, regulatory changes, and operational strategies.