20160425-穆迪服务-Credit_Outlook__Credit_Implications_of_Current_Events_24页_1mb

Credit Outlook Summary

Core Content

This document provides an overview of credit implications from various current events affecting corporations, infrastructure, banks, insurers, and sovereigns. It highlights both credit positive and credit negative impacts, offering insights into financial risks and opportunities.

Main Points

Corporates

• Smiths Group plc:

  • Acquired Morpho Detection for $710 million, increasing leverage.
  • Pro forma debt/EBITDA ratio will rise to 3.6x from 3.3x, exceeding the 3.0x threshold for its current Baa2 rating.
  • The acquisition is expected to improve revenue stability and create synergies starting in 2017.
  • Despite increased leverage, the integration is expected to bring debt/EBITDA below 3.0x by the end of 2018.

• Coca-Cola Amatil Limited:

  • Secured a 20-year contract to distribute Monster Energy drinks in Australia and New Zealand.
  • Credit positive due to potential increase in market share and diversification of revenue streams.
  • The agreement allows for premium pricing and helps offset weak carbonated soft drink growth.

• Evergrande Real Estate Group Limited:

  • Injected RMB9 billion into Evergrande Life Insurance, which is credit negative.
  • The injection raises investment risk and reduces liquidity, as it consumes 5.5% of Evergrande's cash balance.
  • The company's debt leverage is expected to remain weak, with the cash/short-term debt ratio declining to 98% from 103%.

Infrastructure

• COMGAS (Companhia de Gas de Sao Paulo S.A.):

  • Experienced a 14.3% decline in February industrial gas consumption, leading to credit negative implications.
  • Expected sales volume to decline by 2-11% in 2016, with EBITDA likely to fall to BRL1.2-BRL1.3 billion.
  • Despite the decline, the company has strong credit metrics, including an interest coverage ratio of 7.4x and cash flow from operations to debt ratio of 38.8%.

• Alinta Holdings Limited:

  • Entered into a long-term gas supply contract with Chevron, which is credit positive.
  • The deal supports Alinta's gas business in Western Australia, where it has a dominant market share.
  • The company's ability to secure long-term gas supply is crucial for maintaining its credit quality.

Banks

• Canadian Bank Bail-in Legislation:

  • Credit negative for senior debtholders due to reduced government support and potential losses.
  • The legislation aims to reduce public cost by converting senior debt into equity and imposing loss-absorbency requirements.
  • Implementation is expected by late 2016, with a transition period of up to three years.

• Italian Banks' Stake in Atlante:

  • UniCredit and Intesa Sanpaolo each contributed €1 billion to the Atlante rescue fund.
  • The investment is credit negative as it may require deduction from regulatory capital and reduce capital buffers.
  • If the stake is deducted, it could lead to coupon suspensions for additional Tier 1 instruments.

Insurers

• UnitedHealth Group:
  • Exited the Affordable Care Act public exchanges, which is credit positive for the insurer.
  • This move allows the company to focus on more profitable segments and reduce exposure to lower-margin exchanges.

Sovereigns

• IMF Visit to Bosnia and Herzegovina:
  • Boosted chances for a credit-positive funding agreement.
  • The visit indicates potential for improved financial cooperation and support.

Covered Bonds

• German Pfandbrief Act:
  • Maturity extension option is credit positive, providing more flexibility for bond issuers.

Key Information

• Smiths Group will see increased leverage, but the acquisition is expected to lead to improved debt metrics over time.
• Coca-Cola Amatil benefits from a long-term distribution deal with Monster Energy, enhancing its market position and diversifying revenue.
• Telstra faces credit negative implications due to reduced wholesale backhaul prices and competition from NBN.
• COMGAS is negatively impacted by declining industrial gas consumption but has strong operational cash flow and interest coverage.
• Evergrande is credit negative due to its capital injection into the insurance sector, which raises investment risk and weakens leverage.
• Alinta gains credit positive benefits from securing long-term gas supply contracts, supporting its dominant position in Western Australia.
• Canadian banks face credit negative consequences due to the bail-in legislation, which reduces government support and increases risk for senior debtholders.
• Italian banks investing in Atlante face credit negative implications due to potential capital deductions and reduced buffers.
• UnitedHealth is credit positive from exiting the public exchanges.
• Bosnia and Herzegovina may benefit from a credit-positive funding agreement following the IMF visit.
• The German Pfandbrief Act offers credit positive benefits through the maturity extension option.

Conclusion

The document outlines a mix of credit positive and negative events across different sectors. While some companies like Coca-Cola Amatil and Alinta benefit from strategic agreements and long-term contracts, others such as Smiths Group and Evergrande face increased leverage and investment risks. The impact of regulatory changes, such as the Canadian bail-in legislation and Italian banks' participation in Atlante, also presents challenges for certain stakeholders. Sovereign developments and covered bonds are noted for their potential to improve credit outlooks.