20180614-穆迪服务-Credit_Outlook_17页_876kb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications related to various current events, including corporate acquisitions, infrastructure developments, banking strategies, insurance transactions, and public finance commitments. The focus is on how these events affect the credit profiles of the involved entities.

Main Points

Corporates

• Envision Healthcare's sale to KKR is credit negative due to the expected increase in leverage and reduction in interest coverage.
• KKR's funding method for the LBO is unclear, but Envision's adjusted debt/EBITDA is projected to rise sharply.
• Envision's decision to sell the entire company maintains its competitive advantage but reduces its flexibility in cost-saving and acquisition strategies.
• The company's revenue split is 84% from physician staffing and 16% from ambulatory surgical centers, with diversified specialties.

USG's Takeover by Knauf

• The acquisition by Knauf is credit negative as it will increase USG's balance sheet debt.
• USG's adjusted debt/EBITDA is expected to worsen from 2.5x to a higher level.
• USG's previous strong financial metrics are constrained by distribution-channel concentration and cyclical end-markets.
• The combined company aims to be a global building materials company, but the financial guarantees and reporting requirements will be evaluated.

Thames Water's Leakage Settlement

• The settlement for excessive water leakage is credit negative due to revenue loss and increased penalties.
• The package includes £65 million in refunds and £54 million in penalties, with the largest penalties expected in 2020-21.
• The company also faces a 130-basis-point reduction in allowed returns and stricter cost allowances.
• Thames Water has committed to a further 15% reduction in leakage, but performance is expected to remain below targets until 2019-20.

HSBC's New Business Plan

• HSBC's focus on internal growth, efficiency, and customer service is credit positive.
• The plan includes a $15–$17 billion investment over two years, with a majority allocated to core business and new opportunities.
• The bank's strategic goals include strengthening its international network and wealth management businesses.
• HSBC's capital and profitability targets are ambitious but achievable given its current capital position.

France's Countercyclical Capital Buffer

• The introduction of a 0.25% countercyclical buffer is credit positive as it increases capital requirements on French exposures.
• The buffer aims to prevent excessive credit growth and maintain high credit standards.
• Large French mutualist banks and EU banks with exposure to France are most affected, with increased CET1 requirements.
• The buffer reduces capital headroom, increasing the risk of regulatory restrictions on earnings distributions.

Genworth Financial's Acquisition by China Oceanwide

• The CFIUS approval is credit positive, increasing the likelihood of the acquisition closing.
• COH's investment will help Genworth pay down debt and improve its financial leverage.
• The deal still requires additional regulatory approvals, including from HUD and other US and Canadian regulators.
• Genworth's long-term care business may not receive additional capital support from COH, relying instead on its own financial strength.

New York City's Consent Decree

• The consent decree for NYCHA will cost the city more than $1 billion, a credit negative due to reduced fiscal flexibility.
• The agreement mandates increased capital support for NYCHA, which is currently largely funded by federal and non-city sources.
• The decree aims to improve housing conditions and stabilize NYCHA, but the city's financial commitment may limit its ability to make other cuts.
• The city's capital grants to NYCHA are expected to increase and stabilize under the decree.

Key Information

• Envision Healthcare and USG are both facing credit negative impacts due to their respective acquisitions and financial obligations.
• Thames Water is under pressure from penalties and reduced returns, further affecting its interest coverage.
• HSBC has a credit positive outlook due to its strategic plan and financial targets.
• France's countercyclical buffer is a positive measure for credit quality, though it affects bank capital requirements.
• Genworth Financial's acquisition is credit positive as it increases the likelihood of debt repayment.
• New York City's consent decree imposes additional costs on the city, impacting its fiscal flexibility but improving NYCHA's stability.

Structure

• Corporates: Envision Healthcare and USG are analyzed, with Envision's sale to KKR and USG's acquisition by Knauf being credit negative.
• Infrastructure: Thames Water's leakage settlement is credit negative.
• Banks: HSBC's new business plan is credit positive; France's countercyclical buffer is credit positive.
• Insurers: Genworth Financial's acquisition by COH is credit positive.
• US Public Finance: New York City's consent decree with NYCHA is credit negative due to increased financial obligations.

Conclusion

The document outlines the credit implications of various events, highlighting both negative and positive impacts on different sectors. While some entities face financial challenges due to acquisitions, regulatory actions, and operational issues, others benefit from strategic repositioning and improved financial management. The analysis underscores the importance of capital structure, profitability, and regulatory compliance in assessing credit risk.