20160418-穆迪服务-Credit_Outlook_42页_1mb

CreditOutlook Summary

Core Content

This document provides an overview of credit implications related to various sectors and entities as of 18 April 2016. It highlights key developments in corporate, infrastructure, bank, and sovereign credit risk, along with rating changes and research highlights. The main focus is on how recent events affect the financial health and creditworthiness of companies and governments.

Main Points by Sector

Corporates

• Rice Energy:

  • Issued 20 million shares to raise $327 million.
  • Funds will be used for strategic acquisition in the Marcellus shale and 2017 capital budget.
  • The equity issuance is credit positive as it helps manage leverage during low natural gas prices.
  • The acquisition will increase drilling inventory by over 35% but will not significantly impact production until 2018.

• Encana:

  • Completed a $400 million debt buyback, reducing debt by 9% and improving leverage.
  • The buyback is an 18% discount to par, an opportunistic use of liquidity.
  • Expected to improve EBITDA/interest ratio and retained cash flow.
  • Still faces challenges with oil prices and negative free cash flow in 2016 and 2017.

• PEMEX:

  • Received a $4.2 billion government commitment, which is credit positive.
  • Helps reduce external funding needs and improves liquidity.
  • Includes both conditional and unconditional support.
  • Despite the support, credit metrics are expected to worsen due to low oil prices and high taxes.

• ArcelorMittal:

  • Conducted a $3 billion rights issue to reduce debt.
  • Will use proceeds to buy back $1.5 billion of euro and USD bonds.
  • Leverage is expected to remain elevated, but the move is credit positive.
  • Strong liquidity remains supported by cash and committed facilities.

• Link REIT:

  • Sold seven Hong Kong malls for HKD1.96 billion, a 23% premium over appraised value.
  • Proceeds will be used for debt repayment and unit buybacks.
  • Despite debt reduction, leverage is expected to stay high due to planned acquisitions.
  • Adjusted debt/EBITDA is projected to remain around 5.0x.

• Wesfarmers:

  • Discovery of accounting breaches at Target subsidiary is credit negative.
  • Resulted in a 24% drop in Target's EBIT, not the expected 5.7% growth.
  • Highlights issues with corporate controls and management practices.
  • Does not significantly affect debt/EBITDA calculations but raises concerns about future strategy.

Infrastructure

• Texas Regulators:
  • Suspended investigation into utility tax collections, a credit positive for select T&D utilities.
  • Affects AEP Texas Central Company, CenterPoint Energy Houston Electric, LLC, and Oncor Electric Delivery Company LLC.
  • The suspension removes a near-term cash flow risk.
  • InfraREIT, Inc. may still file a rate case, impacting its cash flows.

Banks

• Italian Bank Rescue Fund (Atlante):

  • Credit positive for weaker banks but not a systemic solution.
  • Fund will receive €6 billion in equity and may be leveraged.
  • Aimed at addressing capital needs of smaller banks and improving solvency.
  • Does not address the broader issue of bad loans in the sector.

• Russia's Deposit Insurance Fees:

  • Increased from 0.10% to 0.12% of retail deposits per quarter.
  • Credit negative for Russian banks, as it reduces profitability.
  • Banks with higher deposit rates will face even greater increases.
  • Estimated impact: 8% reduction in earnings this year and 27% for VTB24.

Sovereigns

• Mexico:

  • Government transferred $4.2 billion to PEMEX, a credit positive.
  • Helps reduce external funding needs and improves liquidity.
  • PEMEX's tax payments account for 20% of federal budget.
  • Monopoly status is changing due to new energy law, but it will remain a dominant player.

• Sweden:

  • Reduced budgeted deficit despite refugee influx.
  • Integration policies are expected to enhance growth potential.
  • Credit implications are positive due to fiscal discipline and economic resilience.

• Ukraine:

  • Government formation after a two-month delay is credit positive.
  • Suggests political stability and potential for improved governance.
  • Could lead to better fiscal management and credit profile.

• Korea:

  • Ruling party fails to gain parliamentary majority, a credit negative.
  • May lead to political uncertainty and challenges in policy implementation.
  • Could impact economic stability and creditworthiness.

Rating Changes

• Downgraded: DJO Finance, Energy XXI Gulf Coast, Woori Bank, Hancock Holding, BOK Financial, Cullen/Frost Bankers, Binhai Investment Company, Eesti Energia.
• Upgraded: Sabre Holdings, Bankia, BAWAG, Santander UK, and 87 tranches of US subprime RMBS.
• Other actions: Upgrades and downgrades were made in various sectors, including US CMBS, Australian RMBS, and UK securitizations.

Research Highlights

• Published reports on European pharmaceuticals, EMEA oil, gas, metals and mining, UK corporates, North American covenant quality, Allergan, global oil and gas, US restaurants, Indian power generators, global public-private partnerships, US regional banks, Brazilian banks, Italian banks, Russian banks, Central and Eastern European banks, Asia-Pacific sovereigns, climate risk disclosures, Czech regional and local governments, Puerto Rico, and others.

Credit Implications Summary

Key Information

• Equity Issuance and Debt Buybacks: Several companies used equity issuance and debt buybacks to reduce leverage and improve credit profiles.
• Government Support: Mexico's support for PEMEX and the Italian rescue fund show government intervention in credit risk mitigation.
• Liquidity Constraints: Many entities face liquidity challenges, with solutions such as asset sales and capital injections being key strategies.
• Rating Actions: Moody's made numerous rating changes, reflecting shifts in creditworthiness across various sectors.
• Accounting and Governance Issues: Breaches in accounting practices and governance at Wesfarmers and Target raise concerns about operational integrity and credit risk.

Conclusion

The document outlines a mix of credit positive and negative developments across corporate, infrastructure, bank, and sovereign sectors. While some companies benefit from equity issuances, debt buybacks, and government support, others face challenges due to liquidity constraints, accounting irregularities, and economic conditions. Moody's continues to monitor and adjust credit ratings based on these developments, with a focus on long-term financial stability and risk management.