20160201-穆迪服务-Credit_Outlook_Credit_Implications_of_Current_Events_63页_2mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications related to various corporate, infrastructure, banking, insurance, managed investment, sovereign, and securitization events. It includes rating changes, research highlights, and specific analyses on how recent developments may affect credit profiles and financial positions of different entities.

Main Viewpoints

Corporates

• Xerox's Planned Split: The proposed split into two separate companies is credit negative due to reduced business diversity and profitability. The lack of clear capitalization plans and potential debt allocation issues could lead to a downgrade.
• Johnson Controls & Tyco International Merger: The merger is credit positive for Johnson Controls (JCI) and credit negative for Tyco International (TIFSA). JCI's credit outlook was changed to positive, while TIFSA's rating is under review for downgrade. The merger will result in higher debt/EBITDA for TIFSA and a loss of consolidated protection.
• Lockheed Martin's IT Services Spinoff: The spinoff is credit negative as it removes a valuable segment and increases leverage. The company may need to rely on revolver draws and commercial paper for liquidity, which could increase financial risk.
• FedEx's Share Repurchase Authorization: The authorization is credit negative as it suggests aggressive shareholder return strategies and may require additional debt issuance, which could strain liquidity.
• Brown-Forman's Stock Buyback Plan: The $1 billion buyback is credit negative, increasing leverage and reducing flexibility. It follows a trademark sale, which also had credit implications.
• Times Property Holdings' Land Acquisition: The acquisition is credit negative due to increased execution and concentration risks, as well as higher land costs affecting profit margins. The company is expanding debt-funded operations, increasing financial risk.

Infrastructure

• US Supreme Court Ruling on Demand Response: The ruling upholds FERC Order 745, which is credit negative for unregulated generators in the PJM Interconnection system. This may affect their compensation structures and financial performance.
• Kansai's Nuclear Reactor Restart: The restart is expected to improve earnings and price competitiveness for Kansai, offering a credit positive outlook.

Banks

• FirstMerit Sale: Highlights that even highly rated small banks may face credit-negative strategic choices.
• Italy's Bad-Bank Scheme: Will require recognition of loan losses, negatively impacting credit profiles.
• RBS Charges: Large charges announced are credit negative.
• Ukrainian Government Capital Injections: Beneficial for state-owned banks, offering a credit positive outlook.
• Egypt's Central Bank Policy: Will not ease liquidity pressures for banks.
• South Africa's Interest Rate Hike: Likely to weaken banks' asset quality, a credit negative development.

Insurers

• AIG's P&C Reserve Woes: Ongoing issues are credit negative.
• Aetna's Reinsurer Deal: Provides limited risk protection, not a significant credit benefit.

Managed Investments

• Legg Mason's Acquisitions: Credit negative due to potential over-leveraging in alternative assets.
• China's New Money Market Fund Rules: Credit positive as they enhance transparency and regulatory clarity.

Sovereigns

• Saudi Arabia & China's Financial Support to Egypt: Eases external strains, offering a credit positive outlook.
• Philippines' Growth: Shows resistance to global slowdown, credit positive.
• Malaysia's Revised Budget: Indicates strong fiscal consolidation commitment, credit positive.

Securitization

• Threatened Labor Strike in Argentina: Would be credit negative for oil and gas royalty rights securitization.

Key Information

Rating Changes

• Downgraded Entities: Discovery Communications, SK E&S, AIG's North American P&C subsidiaries, seven German banks, five Italian banks, AIG Europe Limited, Bank of Nova Scotia, and US CMBS.
• Upgraded Entities: Alleghany Corporation, RSUI Indemnity Company, Landmark American Insurance Company, Mortgage Guaranty Insurance Corporation, Radian Guaranty, 22 German banks, 16 Italian banks, Bahrain Islamic Bank, KBC Bank, US subprime RMBS, and US CMBS.

Research Highlights

• Published reports on: US building materials, US corporates rated B3 and lower, European satellite services, US chemicals, global oil and natural gas, global base metals, Asian telecom and media, Chinese property developers, US wireline telecom, Mexican construction, US covenant quality, Asia-Pacific corporates, Nebraska public power utilities, SK E&S, European banks, German and Italian banks, Chinese banks, Malaysia, Zimbabwe, Jordan, Texas local governments, US military housing, US universities, US equipment ABS, US CLOs, European covered bonds, European CLOs, and UK RMBS.

Summary of Credit Impacts

Conclusion

The document outlines a range of credit implications across different sectors and entities. While some developments, such as improved accounting standards and sovereign support, are credit positive, most corporate actions like splits, mergers, and share buybacks are credit negative due to increased financial risk, reduced diversification, and potential liquidity strains. The analysis emphasizes the importance of transparency, strategic alignment, and financial discipline in maintaining or improving credit profiles.