20170814-穆迪服务-Credit_Outlook_20页_898kb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications from recent corporate and financial events. It includes evaluations of acquisitions, asset sales, production delays, and regulatory changes across various industries and regions, focusing on their impact on credit ratings and financial stability.

Main Points and Key Information

Corporates

• Vantiv's Acquisition of Worldpay:

  • Credit Impact: Credit negative due to increased leverage, but strategically sound for global scale and diversity.
  • Debt/EBITDA: Initially over 5x, expected to decline to 4x by end of 2019.
  • Cash Flow: Combined operating cash flow of nearly $1.5 billion will support deleveraging.
  • Synergies: Projected cost synergies of ~$200 million over three years.
  • Historical Leverage Reduction: Vantiv has a history of reducing leverage post-acquisition.

• Air Medical's Acquisition of AMR:

  • Credit Impact: Credit negative as the deal is likely to be funded with incremental debt.
  • Debt/EBITDA: Expected to remain in mid-to-high 6x range.
  • Benefits: Increased scale and diversification of operations, reducing seasonal risk exposure.
  • Ratings: Secured debt at B3, unsecured notes at Caa2.

• Envision Healthcare's Sale of AMR:

  • Credit Impact: Credit positive as the proceeds will help reduce leverage.
  • Debt/EBITDA: Expected to decrease from ~4.9x to ~4.0x by end of 2018.
  • Proceeds Use: Half of the $1.9 billion proceeds will be used to repay debt, the other for acquisitions.
  • Strategic Move: Aligns with Envision's strategy to focus on physician staffing and ambulatory surgery centers.

• Constellation Brands' Acquisition of Funky Buddha Brewery:

  • Credit Impact: Credit positive due to expansion of premium craft portfolio without significant leverage increase.
  • Strategic Move: Aligns with the company's focus on premium alcohol and reducing Mexican beer concentration.
  • Expected Growth: Double-digit growth for Funky Buddha's sales, especially in IPAs.

• CMPC's Idling of Brazilian Production Facility:

  • Credit Impact: Credit negative due to production cut and EBITDA loss.
  • Production Impact: 17% reduction in annual hardwood production, ~$140 million EBITDA loss.
  • Debt/EBITDA: Expected to rise to 5.5x, up from 4.7x.
  • Liquidity: Increased by $500 million green bond issuance, with $1.3 billion cash balance in Q2 2017.
  • Market Impact: May lead to more balanced hardwood pulp prices due to increased supply from competitors.

• SGL's Asset Sale and Debt Paydown:

  • Credit Impact: Credit positive as it improves maturity profile and liquidity.
  • Debt/EBITDA: Expected to drop to ~6x by end of 2017, from ~8x previously.
  • Proceeds: Over €230 million from asset sale, allowing early redemption of bonds.
  • Free Cash Flow: Expected to be positive by 2019.

• Omantel's Acquisition of Zain Group Stake:

  • Credit Impact: Credit positive due to cost synergies and dividend benefits.
  • Debt/EBITDA: Expected to remain within quantitative guidance.
  • Strategic Benefits: Access to Zain's technological and sourcing platforms, and dividend yield exceeding cost of debt.
  • Competitive Pressure: Increased due to potential third telecom provider in Oman.

Infrastructure

• Consolidated Edison's Equity Issuance:

  • Credit Impact: Credit positive as it funds capital expenditures and maintains cash flow-to-debt ratio above 19%.
  • Capital Expenditures: Expected to exceed $3.5 billion, with equity issuance providing $345 million.
  • Liquidity: Strong access to capital markets, with $2.25 billion revolving credit facility.

• Cameron LNG Construction Delays:

  • Credit Impact: Credit negative due to delayed cash flow generation.
  • Delay Details: Commercial operation date pushed to 2019, with original target of end of 2018.
  • Contractual Protections: Completion guarantees and LRTAs (Liquefaction and Regasification Tolling Agreements) mitigate financial risk.
  • LRTAs: Primary source of cash flow for the project, with fees adjusting for delays.

Banks

• Honduras' New Credit-Card Law:
  • Credit Impact: Credit negative for banks due to reduced interest rates and profitability.
  • Rate Caps: Maximum rate set at 54%, below current market rates.
  • Impact on Banks:
    • Banco Promerica S.A.: 38% of loans are credit cards, significantly affected.
    • BAC Honduras: 24% of loans are credit cards.
    • Banco Financiera Comercial Hondureña: 11% of loans are credit cards.
  • Fee Income: Decline due to new regulations, with credit cards contributing ~14% to systemwide net revenue.

Securitization

• Invitation Homes-Starwood Waypoint Homes Merger:
  • Credit Impact: Credit positive for both firms as it benefits SFR (Single-Family Rental) securitizations.
  • Strategic Synergy: Combines assets and operations to enhance securitization performance.

Recently in Credit Outlook

• Vantiv's Acquisition of Worldpay: Credit negative due to increased leverage.
• Air Medical's Acquisition of AMR: Credit negative due to debt funding.
• Envision Healthcare's Sale of AMR: Credit positive due to leverage reduction.
• Constellation Brands' Acquisition of Funky Buddha: Credit positive for portfolio expansion.
• CMPC's Idling of Brazilian Facility: Credit negative for delayed deleveraging.
• SGL's Asset Sale and Debt Paydown: Credit positive for improved leverage and liquidity.
• Omantel's Acquisition of Zain Group Stake: Credit positive for cost synergies and dividends.

Summary of Credit Implications

Conclusion

The credit outlook is mixed, with some companies experiencing credit positives due to strategic moves and deleveraging, while others face credit negatives due to increased leverage, production delays, and regulatory constraints. These events highlight the importance of financial flexibility, operational diversification, and strategic planning in maintaining credit stability.