20160526-穆迪服务-Credit_Outlook__Credit_lmplications_of_Current_Events_17页_1mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications stemming from recent corporate, infrastructure, and banking developments. It outlines the credit impacts of various events, including major contracts, acquisitions, regulatory changes, and financial restructuring, from the perspective of Moody's credit officers.

Main Points by Sector

Corporates

• Boeing Snags VietJet Order:

  • Credit Impact: Credit positive for Boeing and credit negative for Airbus.
  • Reason: VietJet's order for 100 Boeing 737 MAX 200 planes is a significant win for Boeing, especially as it competes with Airbus in the narrowbody segment. Airbus has been gaining market share with its A320neo, which is outpacing Boeing's 737 MAX in order acquisition.
  • Context: The order follows the lifting of the US arms embargo against Vietnam, highlighting the strategic importance of geopolitical shifts in the aviation industry.

• Bayer's Offer to Acquire Monsanto:

  • Credit Impact: Credit negative for Bayer.
  • Reason: The acquisition would significantly increase Bayer's financial leverage, raising its Moody's-adjusted total debt/EBITDA to near 4.5x. This would also raise execution and integration risks.
  • Strategic Rationale: The deal aims to create the world's largest player in the agrochemical and seeds sector, but the financial burden and operational risks outweigh the strategic benefits.

• Midea Group's Takeover Bid for KUKA:

  • Credit Impact: Credit negative for Midea.
  • Reason: Increasing its stake in KUKA to 30% would likely raise Midea's leverage beyond its current level and reduce its net cash position.
  • Strategic Rationale: The acquisition is expected to enhance Midea's business diversity and automated manufacturing capabilities, aligning with its strategy to counteract wage inflation in China.

Infrastructure

• Comisión Federal de Electricidad (CFE) New Labor Contract:
  • Credit Impact: Credit positive.
  • Reason: The new labor contract significantly reduces CFE's pension liability, which lowers its debt and improves its funds from operations to debt ratio.
  • Government Role: As a government-owned entity, CFE is likely to receive support from the Mexican government, which will assume the reduced pension liabilities.

Banks

• Grupo Supervielle's IPO:

  • Credit Impact: Credit positive.
  • Reason: The IPO strengthens the holding company's capital base and liquidity, allowing it to meet growing credit demand in Argentina. It also improves transparency and corporate governance.
  • Market Context: The IPO follows Argentina's improved economic environment and its first cross-border bond sale since 2002, indicating better access to global capital markets.

• UK Measures to Stoke Bank Competition:

  • Credit Impact: Credit negative.
  • Reason: The proposed changes to increase competition in the UK banking sector, such as simplifying access to transaction histories and overdraft charges, will increase costs and reduce revenues for banks.
  • Impact on Margins: These measures are expected to hurt bank margins due to increased competition and operating expenses, especially in SME lending.

• BSI Ordered to Shut Down Singapore Operations:

  • Credit Impact: Credit negative for BSI Group and EFGI.
  • Reason: The loss of the Singapore banking license and associated fines will cut BSI's access to Asian private banking markets and damage its reputation.
  • Takeover Implications: EFGI's planned takeover of BSI is conditional on rapid integration, which poses execution and credit risks.

• Chinese Banks' Resumption of Nonperforming Loan Securitizations:

  • Credit Impact: Credit positive.
  • Reason: The resumption of NPL securitizations provides an additional tool for banks to manage their nonperforming loans, particularly retail NPLs.
  • Key Banks: China Merchants Bank and Bank of China are the first to propose NPL securitizations, which could help reduce their problem assets.

• Vietnamese Banks' Exposure to HAGL Restructuring:

  • Credit Impact: Credit negative.
  • Reason: The restructuring of HAGL's debt will reduce and extend its cash flows, lowering loss-absorption buffers for Vietnamese banks.
  • Exposure Levels: BIDV has the highest exposure to HAGL, with loans and bonds comprising 27% of its tangible common equity.

Key Information

• Boeing and Airbus: The competition between Boeing and Airbus remains intense, with price concessions becoming more critical in securing orders.
• Bayer and Monsanto: The proposed acquisition is a strategic move but poses significant financial and operational risks, leading to a credit negative outlook.
• Midea and KUKA: The acquisition is expected to enhance Midea's capabilities but will increase its leverage and reduce its liquidity.
• CFE Pension Liability Reduction: The new labor contract reduces CFE's pension liability, improving its financial position and credit outlook.
• Grupo Supervielle IPO: This is a positive development for the holding company, enhancing its capital base and liquidity.
• UK Banking Reforms: These reforms are expected to increase competition and reduce bank revenues, negatively impacting credit quality.
• BSI License Withdrawal: The loss of the Singapore license and the associated fines are a significant blow to BSI Group and its parent company.
• Chinese NPL Securitizations: The resumption of NPL securitizations is a positive step for Chinese banks, offering new ways to manage nonperforming assets.
• HAGL Restructuring: The potential restructuring of HAGL's debt is a credit negative for Vietnamese banks, particularly those with high exposure to the company.

Summary of Credit Impacts