20170327-穆迪服务-NEWS___ANALYSIS_35页_1mb

Credit Outlook Summary

Core Content

This document provides a detailed analysis of credit implications of various current events across different sectors, including Corporates, Infrastructure, Banks, Insurers, Exchanges, Sovereigns, Sub-sovereigns, and Securitization. It outlines the financial and operational impacts of these events on credit ratings and financial health of the entities involved.

Main Points by Sector

Corporates

• Sears Holdings Corp. (Caa2 stable)

  • Highlighted going-concern risk in its 10-K filing, indicating substantial doubt about its ability to continue operations.
  • Has taken steps to improve liquidity, including the sale of Craftsman and amendments to credit facilities.
  • Faces significant operational losses and high debt levels, with $4.2 billion of funded debt and $1.8 billion of unfunded pension obligations.
  • Ratings could be upgraded if operating results improve and liquidity remains adequate; downgraded if liquidity constraints increase or losses worsen.

• Perrigo Company plc (Baa3 negative)

  • Audit of Tysabri revenue recognition practices is credit negative, potentially leading to restatements.
  • Sale of Tysabri royalty stream to RPI Finance Trust is credit positive, with proceeds expected to reduce debt/EBITDA.
  • Filing deadline for 10-K extended to 14 June 2017, with potential default if not filed.

• J. Crew Group, Inc. (Caa2 negative)

  • Debt-exchange proposal is credit negative for term loan due to transfer of intellectual property to a new subsidiary.
  • Uncertain terms of exchange, which could leave the company with high leverage and low EBIT/interest ratios.
  • Litigation ongoing with term loan holders regarding the validity of the IP transfer.

• Ontex Group NV (Ba2 stable)

  • Credit-positive capital increase of €221 million improves liquidity and supports growth.
  • High capital expenditure needs in 2017 due to acquisitions and investments.
  • Liquidity supported by cash reserves and credit facilities, with leverage expected to fall from 4.0x to 3.7x by year-end.

• Vedanta Resources plc (B1 stable)

  • Special dividend from zinc subsidiary increases liquidity and allows debt reduction.
  • Dividend covers 68% of Vedanta Ltd.'s debt maturities for fiscal 2018.
  • Still reliant on dividend income and needs a refinancing plan for remaining debt.

Infrastructure

• Oklahoma Gas & Electric (OG&E, A1 stable)

  • Rate case order is credit negative, resulting in lower revenue increase and reduced cash flow.
  • Refund of $45 million from interim rate increases, impacting capital spending on environmental upgrades.
  • Plans to file rate cases in 2017 and 2018 to recover costs, but current equity-to-debt ratio may hinder financial metric improvement.

• JEA (Aa2 stable)

  • Plan to decommission St. Johns River Power Park is credit positive, expected to reduce costs and debt.
  • Decommissioning will start in 2018, with FPL sharing shutdown costs and environmental remediation.
  • JEA's debt ratio is expected to improve from 65% to lower levels, without needing further rate increases.

Banks

• Wells Fargo & Company (A2 stable)

  • February retail banking trends show stable deposit balances but slower growth in new accounts and credit card applications.
  • Successful defense of retail deposit base is credit positive, despite regulatory issues.

• Argentina's New Government Funding Facility

  • Spur mortgage lending, which is credit positive for banks.

• Portugal's Maturity Extension of State Loans to Resolution Fund

  • Credit positive for banks, reducing refinancing risks.

• Hungary's MKB Bank

  • Returns to profitability after six years of losses, credit positive.

• South African Banks

  • Asset quality pressures ease due to declining household debt to disposable income, credit positive.

• Tanzania's Banks

  • Benefit from lower cash reserve requirements by the Central Bank, credit positive.

Insurers

• Japanese Insurers
  • New products and investment strategies are credit negative, indicating potential risk in their financial practices.

Exchanges

• SEC's Two-Day Settlement Rule

  • Credit positive for clearinghouses and members, improving operational efficiency.

• Brazil's Antitrust Regulator Approves BM&FBovespa-Cetip Merger

  • Credit positive, as the merger is expected to enhance market position and financial performance.

Sovereigns

• Canadian Budget

  • Indicates a resumption of the downward trend in the debt ratio, credit positive.

• Poland's Growth Prospects

  • Improve with a drop in unemployment, credit positive.

Sub-sovereigns

• Brazil Excludes State Pensions from Reforms
  • Credit negative for states, as pension obligations are not addressed in the reforms.

Securitization

• American Homes 4 Rent
  • Equity raise and debt repayment are credit positive for single-family rental securitizations, enhancing cash flow and reducing leverage.

Key Information

• Credit Positive Events: Vodafone India's joint venture, Ontex's capital increase, JEA's decommissioning plan, Argentina's funding facility, Portugal's maturity extension, Hungary's MKB Bank profitability, South African banks' asset quality improvement, Tanzania's lower cash reserve requirement, SEC's settlement rule, BM&FBovespa-Cetip merger, Canadian budget, and Poland's unemployment drop.
• Credit Negative Events: Sears' going-concern risk, Perrigo's audit issues, J. Crew's debt-exchange, Japanese insurers' strategies, Oklahoma Gas & Electric's rate case, and Brazil's pension exclusion from reforms.
• Uncertain Outcomes: J. Crew's exchange proposal, OG&E's future rate cases, and potential impact of natural gas price volatility on JEA's operations.

Summary

The document evaluates the credit implications of various corporate and market events, highlighting both positive and negative impacts on financial health and ratings. Key factors include liquidity improvements, debt reduction, operational performance, regulatory changes, and strategic moves. The analysis underscores the importance of financial discipline, regulatory compliance, and market conditions in shaping credit outlooks.