20170420-穆迪服务-NEWS___ANALYSIS_17页_1008kb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications of various corporate, banking, insurance, and exchange-related events from April 2017. It highlights both credit-positive and credit-negative developments, focusing on how these events affect financial stability, leverage, profitability, and risk management of the respective entities.

Main Points

Corporates

• Delta Air Lines:

  • Made $3.55 billion in pension contributions, which is credit positive.
  • Contributions reduce future cash outflows and adjusted debt, improving debt/EBITDA to 2.43x.
  • Despite the reduction in pension underfunding, the company will still need to meet its $4 billion net debt target by 2020.
  • Strong liquidity and free cash flow, with a solid balance sheet in the airline industry.

• SUPERVALU:

  • Acquired Unified Grocers for $375 million, increasing its wholesale distribution business to over 70% of its revenue.
  • Credit positive due to scale and cost synergies, though retail segment remains under pressure.
  • Expected to increase leverage slightly but improve over time with synergies.

• Synlab:

  • Received a €250 million equity investment from Novo, increasing its capacity to reduce leverage.
  • The investment is expected to support bolt-on acquisitions, which will be financed with cash.
  • Novo's experience in healthcare investments is seen as a strategic benefit.

• Nexteer Automotive:

  • Formed a 50/50 joint venture with Dongfeng in China, which is credit positive.
  • The venture diversifies geographic and customer exposure, reduces reliance on General Motors.
  • Expected to improve profitability through higher-margin electric power steering products.

Banks

• Wells Fargo:

  • Released findings from an independent investigation into sales practices, which is credit positive.
  • Remedial actions include restructuring compensation and improving oversight, enhancing risk culture.
  • However, the bank still faces legal and reputational challenges.

• Raymond James Financial:

  • Agreed to a $150 million settlement related to EB-5 program mismanagement, which is credit negative.
  • The settlement will consume half of the company's pre-tax earnings for the quarter.
  • The firm is working to strengthen its risk management and compliance functions.

Insurers

• US Health Insurance Exchanges:
  • New rules to stabilize the Affordable Care Act (ACA) exchanges are credit positive for insurers.
  • These rules aim to improve risk assessment and reduce losses from underwriting errors.
  • However, the rules do not significantly improve the financial situation of insurers, as participation decisions are still influenced by uncertainty and profitability concerns.

Exchanges

• CME Group:
  • Announced the closure of its European derivatives exchange and clearinghouse, which is credit positive.
  • The move reduces complexity and operational costs without affecting revenues.
  • CME's US infrastructure is preferred by customers, so the closure is unlikely to have a material negative impact.

Key Information

• Credit Positive Developments:

  • Delta Air Lines' pension contributions.
  • SUPERVALU's acquisition of Unified Grocers.
  • Synlab's equity investment from Novo.
  • Nexteer's joint venture with Dongfeng.
  • Skipton Building Society's sale of nonperforming mortgage loans.
  • CME Group's closure of European operations.

• Credit Negative Developments:

  • TPG's entry into the Australian market affecting Telstra and Optus.
  • Raymond James Financial's investor settlement.

Summary of Credit Impacts

Additional Notes

• The document emphasizes the importance of financial discipline, transparency, and strategic acquisitions in improving credit profiles.
• It also highlights the challenges faced by certain sectors, such as the US health insurance exchanges and the UK mortgage market.
• Moody's Analytics continues to monitor these developments and updates credit ratings accordingly.