20160118-穆迪服务-Credit_Outlook_67页_2mb

Credit Outlook Summary - 18 January 2016

Core Content Overview

This document provides a summary of credit implications related to current events across various sectors, including corporations, banks, insurers, sovereigns, and sub-sovereigns. It outlines both credit positive and negative impacts of recent developments, such as joint ventures, settlements, buyback plans, and regulatory changes.

Main Points by Sector

Corporates

• Qualcomm's Joint Venture with TDK:

  • Credit Positive: Qualcomm's $3 billion agreement with TDK to form a joint venture for RFFE modules and RF filters is credit positive. It enhances Qualcomm's ability to compete in the growing RFFE market by integrating filter technology into its existing components.
  • Potential Negative: The joint venture could negatively impact other filter market players like Avago Technologies, Qorvo, Skyworks, and Murata.

• Brown-Forman's Southern Comfort Sale:

  • Credit Negative: The $543.5 million sale of Southern Comfort and Tuaca trademarks is credit negative due to increased reliance on Jack Daniel's, which may raise leverage if proceeds are not used to reduce debt.

• Intrawest's Buyback Plan:

  • Credit Negative: The $50 million share buyback, funded by cash on hand, is credit negative as it reduces liquidity and may delay de-leveraging. The offer price is a 28% premium, favoring shareholders over creditors.

• Kindred's Settlement with the US DOJ:

  • Credit Negative: The $125 million settlement for Medicare billing issues is credit negative as it reduces liquidity and slightly increases leverage. The company will use its revolver to make the payment, but the settlement also includes a corporate integrity agreement.

• AT&T Bundling DIRECTV with Unlimited Mobile Data:

  • Credit Negative: This bundling strategy poses a competitive threat to cable companies, as it could lead to a shift in video subscriber base, especially in urban areas. The offer may also deter cord-cutters due to higher broadband costs and service quality issues.

• Shaw Media Sale:

  • Credit Positive: The CAD2.65 billion sale of Shaw's media operations to Corus is credit positive. It eliminates below-EBITDA expenses, simplifies regulatory relationships, and funds the WIND Mobile acquisition, which is expected to improve long-term financial performance.

• China's Fuel-Price Floor:

  • Credit Positive: The introduction of a fuel price floor is credit positive for Chinese National Oil Companies (NOCs) as it helps stabilize refining profits and partially offset losses in upstream E&P. CNPC, Sinopec, and CNOOC are expected to benefit.

Banks

• Goldman Sachs' RMBS Settlement:

  • Credit Negative: The $3.26 billion settlement for RMBS activities hurts earnings but reduces tail risk. The firm will take a $1.5 billion after-tax charge, but the settlement limits further legal exposure.

• Bank Membership Rule:

  • Credit Positive: The rule is favorable for Federal Home Loan Banks as it enhances their membership eligibility, which can improve their credit profile.

• Captive Insurers and Mortgage REITs:

  • Credit Negative: A ruling barring captive insurers from Federal Home Loan Bank membership is negative for mortgage REITs, as it restricts their access to funding sources.

• Federal Reserve's Bank Acquisition Review:

  • Credit Positive: A quicker review process for well-regarded acquirers is credit positive, as it reduces uncertainty and supports growth.

• BOK Financial's Energy Loan Provision:

  • Credit Negative: The energy loan provision signals increased risk exposure, suggesting other banks may follow suit.

• Colombia's Infrastructure Financing:

  • Credit Positive: Colombia raising $2 billion for infrastructure is credit positive for its state development bank.

• RCI's Deposit Funding Target:

  • Credit Positive: RCI achieving a 30% deposit funding target is credit positive, indicating improved liquidity and financial stability.

• Egypt's Lending Regulations:

  • Credit Positive: New lending regulations are credit positive for banks. However, increased SME lending quota may negatively impact asset quality.

• Kuwaiti Banks' Risks:

  • Credit Negative: Slowdown in real estate activity increases risk for Kuwaiti banks.

• BNK Financial's Equity Raise:

  • Credit Positive: The equity raise is credit positive for Busan Bank and Kyongnam Bank, as it provides additional capital and strengthens financial position.

Insurers

• US Health Insurers and Medicaid Funding:
  • Credit Positive: President Obama's proposal to extend Medicaid funding is credit positive for US health insurers, as it increases potential revenue and market share.

Sovereigns

• Costa Rica's Loss of Chinese Funding:

  • Credit Negative: The loss of Chinese funding may lead to higher domestic interest rates, negatively affecting creditworthiness.

• Israel's Financial Improvement:

  • Credit Positive: Israel's financial performance has improved beyond expectations, which is credit positive.

• Iran Sanctions Relief:

  • Credit Positive: Sanctions relief is expected to boost liquidity and economic growth, which is credit positive for Iran.

Sub-sovereigns

• Czech Regions' Road Reconstruction Funding:
  • Credit Positive: Czech regions will receive state funding for road reconstruction, which is credit positive for local governments.

US Public Finance

• Oklahoma's Mid-Year Cuts:

  • Credit Negative: Oklahoma's 3% mid-year budget cuts are credit negative for school districts, reducing funding and financial stability.

• Louisiana's Budget Imbalance:

  • Credit Negative: A growing budget imbalance is a concern for Louisiana, especially with the new governor taking office.

Securitization

• Home Partners of America's Securitization:
  • Credit Positive: The company's unique business strategy strengthens its first single-family rental securitization, indicating a positive outlook for its financial structure.

Key Rating Actions

• Downgraded Entities: Evergrande Real Estate Group, Navios Maritime Holdings, Duke Energy, Duke Energy Progress, Progress Energy, and Credit Suisse and affiliates.
• Upgraded Entities: Belfius Bank and subsidiaries, UBS and affiliates, GFI Group, and three Hyundai US auto ABS.

Research Highlights

• Moody's published reports on a wide range of sectors including global airlines, US cable, US building materials, US retail, Asian high-yield bonds, PSA Corp., UK water, aircraft lessors, German municipalities, Mexican states, US states, US state housing finance agencies, US CLOs, European SMEs, Brazilian FIDC securitizations, US solar ABS, and Italian covered bonds.

Upcoming Credit Outlook

• The next Moody's Credit Outlook will be published on 25 January.

Summary of Key Takeaways

• Credit Positive Developments:

  • Qualcomm's joint venture with TDK
  • Shaw's media sale and WIND Mobile acquisition
  • China's fuel price floor for NOCs
  • Bank membership rule for FHLBs
  • RCI's deposit target achievement
  • Colombia's infrastructure financing
  • Egypt's lending regulations
  • Czech regions' road reconstruction funding
  • Home Partners of America's securitization

• Credit Negative Developments:

  • Brown-Forman's Southern Comfort sale
  • Intrawest's share buyback
  • Kindred's DOJ settlement
  • AT&T's DIRECTV bundling strategy
  • Goldman Sachs' RMBS settlement
  • Costa Rica's loss of Chinese funding
  • Oklahoma's budget cuts
  • Louisiana's budget imbalance
  • BOK Financial's energy loan provision
  • Kuwaiti banks' real estate risks
  • Egypt's SME lending quota risks

Conclusion

The credit outlook highlights a mix of positive and negative developments across different sectors. While some companies and entities benefit from strategic moves, regulatory changes, and market dynamics, others face liquidity issues, increased leverage, and competitive pressures. The overall credit risk landscape remains volatile, with significant implications for both corporate and sovereign entities.