20170731-穆迪服务-CreditOutlook_35页_1mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications of current events across various sectors including Corporates, Infrastructure, Banks, Insurers, and Sovereigns. It highlights key developments and their impact on credit ratings and financial health of the involved entities.

Main Points

Corporates

• Lam Research's Strong Results and Outlook Bode Well for Applied Materials

  • Lam Research reported record quarterly revenue of $2.34 billion, up 52% year-over-year.
  • The company's strong outlook for 2017 and 2018 indicates robust demand in the semiconductor industry, particularly in memory sectors.
  • Memory demand is driven by data centers, consumer electronics, and emerging technologies like AI and IoT.
  • Lam's greater exposure to the memory sector positions it better than Applied Materials to benefit from strong equipment spending.

• ServiceMaster's Planned Spinoff of American Home Shield Is Credit Negative

  • The spinoff will reduce ServiceMaster's scale and business diversity.
  • It may lead to an aggressive acquisition strategy, which is not favorable for creditors.
  • The spinoff is expected to be completed in Q3 2018, and the company's credit metrics are uncertain post-transaction.

• West Fraser's Acquisition of Gilman Expands US Lumber Footprint, a Credit Positive

  • West Fraser acquired Gilman's operations for $430 million, increasing its US asset base to 43% of total lumber capacity.
  • The acquisition provides cost synergies and reduces exposure to US-Canada softwood lumber disputes and pine beetle infestations.
  • The company's leverage will remain low relative to its peers, and it is expected to achieve cost savings and improve profitability.

• JBS' Agreement with Creditor Banks Is Credit Positive

  • JBS secured an agreement with banks to preserve credit lines for 12 months, reducing liquidity risk.
  • The company has a significant amount of cash and credit facilities, which helps mitigate short-term financial risks.
  • The agreement allows JBS to focus on addressing legal and governance issues.

• Glencore's Hunter Valley Deal Is Credit Positive

  • Glencore acquired a 49% interest in Hunter Valley coal operations for $1.14 billion.
  • The transaction adds high-quality coal assets and improves operating efficiency without significantly affecting credit metrics.
  • The company expects to receive dividends from the joint venture and maintain strong leverage reduction goals.

• Bright Bidco's Dividend Payment Is Credit Negative

  • Bright Bidco plans to issue $240 million in term loans to pay a $235 million dividend.
  • This would increase adjusted debt/EBITDA to 4.5x, potentially leading to a downgrade.
  • The company's improved EBITDA is not sufficient to fully support the increased debt, though profitability trends are positive.

Infrastructure

• New York Federal Judge Dismisses Challenge of Nuclear Subsidy

  • The dismissal of the lawsuit is credit positive for Exelon Generation Company (ExGen) but credit negative for coal and gas generators like Dynegy and NRG Energy.
  • ZECs are viewed as environmental subsidies, not discriminatory taxes, and the ruling supports ExGen's financial position.
  • Legal appeals are expected, but the immediate impact on cash flows is minimal.

• Court Ruling Against Brazilian Toll-Road Operators Is Credit Negative

  • A court ruling in Brazil may shorten toll-road concession periods, reducing coverage ratios for SPVias and Renovias.
  • The legal dispute could reduce CCR's EBITDA by up to 5% if the ruling stands.
  • CCR may need to provide support to SPVias in a worst-case scenario, with potential financial implications.

Banks

• US Banks' Net Interest Margins Continue to Grow, a Credit Positive

  • Growing net interest margins indicate improved profitability for US banks.
  • This trend is supported by strong demand for credit and stable interest rates.

• RBS' Progress with Williams and Glyn Alternative Plan Is Credit Positive

  • RBS has made progress in its alternative plan, which is favorable for its credit profile.

• National Bank of Greece's Sale of Romanian Subsidiary Is Credit Positive

  • The sale of the Romanian subsidiary improves the bank's financial position and reduces risk exposure.

• Poland's Mortgage Loan Act Takes Effect, a Credit Positive for Banks

  • The new act is expected to enhance the regulatory environment and improve bank credit metrics.

• Bank of Thailand Tightens Consumer Lending, a Credit Positive for Banks

  • Tightening consumer lending regulations are seen as a positive for banks' credit profiles.

• Australia's Proposal to Allow Local Mutuals to Issue Common Equity Tier 1 Capital Is Credit Positive

  • The proposal is expected to enhance capital adequacy and support bank stability.

Insurers

• USI Faces Integration Risk Acquiring Wells Fargo's Insurance Brokerage Operations

  • Integration risks are a concern for USI, potentially affecting its credit profile.

• Markel's Acquisition of State National Is Credit Negative

  • The acquisition is viewed as a negative credit event due to potential integration challenges and increased risk exposure.

Sovereigns

• Central American Customs Integration Will Support Regional Market Development, a Credit Positive

  • Customs integration is expected to boost regional economic development and improve credit outlook.

• US Sanctions Against Venezuelan Officials Have Little Credit Relevance

  • Sanctions are not expected to have a significant impact on credit metrics.

• Poland's Judiciary Reforms Risk Credit-Negative EU Sanctions

  • Judicial reforms in Poland could lead to EU sanctions, negatively affecting the country's credit profile.

• Sri Lanka's Port Deal Boosts Foreign-Exchange Reserves, a Credit Positive

  • The port deal is expected to improve foreign-exchange reserves, supporting the country's credit position.

Key Information

• Positive Credit Impacts:

  • Lam Research and Applied Materials benefit from strong semiconductor demand.
  • West Fraser's acquisition of Gilman improves its US operations and reduces risk.
  • JBS secures credit lines, reducing liquidity risk.
  • Glencore's acquisition enhances its coal portfolio and operational efficiency.
  • Exelon Generation benefits from nuclear subsidy rulings.
  • US banks see improved net interest margins.
  • Australia's capital proposal supports bank stability.
  • Sri Lanka's port deal improves foreign-exchange reserves.

• Negative Credit Impacts:

  • ServiceMaster's spinoff reduces business diversity and may lead to aggressive acquisition strategies.
  • Bright Bidco's dividend payment increases leverage and risks a downgrade.
  • SPVias and Renovias face reduced concession life and coverage ratios.
  • Markel's acquisition of State National poses integration risks.
  • Poland's judiciary reforms risk EU sanctions.

Conclusion

The document outlines the credit implications of various corporate, infrastructure, banking, insurance, and sovereign events. It emphasizes the importance of market trends, regulatory changes, and strategic decisions in shaping credit profiles. Positive developments include strong industry growth, improved financial metrics, and strategic acquisitions, while negative impacts are linked to reduced scale, increased leverage, and legal uncertainties.