20141124-穆迪服务-Credit_Outlook_Credit_lmplications_of_Current_Events_45页_1mb

Credit Outlook Summary

Core Content Overview

The document provides a comprehensive analysis of credit implications stemming from recent events across various sectors, including corporates, infrastructure, banks, insurers, and sovereigns. It highlights both positive and negative credit impacts, with a focus on how these events affect financial stability, leverage, and profitability of the entities involved.

Main Points by Sector

Corporates

• Delta Air Lines' Aircraft Order:

  • Delta ordered 25 A350-900 and 25 A330neo aircraft from Airbus, valued at ~$14 billion.
  • This order is credit positive for Airbus, reinforcing its long-range and medium-range programs and strengthening its relationship with a global carrier.
  • It is credit negative for Boeing, as it lost the order to Airbus, potentially impacting its ability to bridge the 777-to-777X production gap.
  • Boeing may still meet its 2014 order targets but faces challenges in sustaining future order activity without production rate reductions or pricing discounts.

• OHL's Recourse Debt Reduction:

  • OHL reduced its gross recourse leverage through stake sales and bond prepayment.
  • Despite these actions, its leverage is still expected to remain above 5x by year-end, a level higher than previously expected.
  • OHL's concessions business generates poor cash conversion due to non-cash profits and low cash flow after interest payments.
  • The company continues to rely on debt to fund new concessions, and its weak liquidity and aggressive use of margin loans increase credit risk.

• UK Pub Tenants and "Tie" Legislation:

  • The UK House of Commons ended the "tie" requirement, allowing pub tenants to source beer from the open market.
  • This is credit negative for pub owners like Enterprise Inns and Punch Taverns, as it reduces their revenue from beer sales.
  • The change could lead to a protracted lease renegotiation process and a decline in purchasing power and margins for pubcos.

Infrastructure

• Southern California Edison's Nuclear Settlement:
  • The CPUC approved a cost-recovery settlement for the retirement of the San Onofre nuclear plant, which is credit positive for SCE and Edison International.
  • The settlement allows for the recovery of $1.4 billion in net reinvestment costs, reducing the financial burden on SCE.
  • The retirement of SONGS highlights the high fixed costs associated with nuclear power plants, making them vulnerable in low-price environments.
  • Similar risks are seen in other nuclear plants across the US, including those owned by Dominion Resources, Entergy, and Exelon.

Banks

• State Street Bank Investigations:

  • State Street faces credit negative implications due to ongoing investigations into foreign-exchange controls and IT failures.
  • The company is expected to incur additional regulatory and litigation costs, which could impact its financial performance.
  • The recent legal reserve increase to ~$111 million indicates potential financial exposure, though the exact cost remains uncertain.

• Royal Bank of Scotland (RBS):

  • RBS revised its CET1 ratio downward to 5.7% due to stress-test corrections and regulatory fines.
  • The bank is now positioned with the lowest capital ratio among its UK peers, raising concerns about its financial resilience.
  • Despite capital improvements, the bank's restructuring and execution risks remain a concern, especially in light of past IT failures.

Insurers

• Securian's Acquisition of AAM:
  • Securian Financial Group acquired a majority stake in AAM, an asset manager with $16 billion in assets.
  • The transaction is credit positive for Securian, enhancing its asset management capabilities and diversifying its revenue streams.
  • The acquisition is expected to more than triple Securian's external insurance assets under management.
  • While the third-party asset management business is lower-credit quality compared to its core operations, it is unlikely to negatively impact Securian's overall credit profile.

Sovereigns

• Korea's Net Asset International Investment Position:

  • Korea recorded its first-ever net asset international investment position (IIP) of $22.7 billion in September 2014.
  • This is credit positive as it indicates improved external financial stability and reduced vulnerability to capital outflows.

• Indonesian Fuel Price Hikes:

  • Fuel price increases are credit positive for the Indonesian sovereign and Pertamina, the state-owned oil company.
  • The hikes are seen as a move toward fiscal discipline and better alignment with global oil prices, improving the country's financial position.

Key Rating Actions

• Downgraded Entities:

  • Albemarle, Belden, Obrascon Huarte Lain, CEMIG Geracao e Transmissao, Seguros Illimani, Towergate Holdings II.

• Upgraded Entities:

  • Adecco, Tenaska Virginia Partners, Bankoa, Bank of Cyprus Public Company, Bank of Ireland, Korea Exchange Bank, RCB Bank, State of San Luis Potosi, SOAPAP, 12 tranches from 2013-vintage Ally Financial auto asset-backed securitizations.

Research Highlights

• Moody's published analyses on a wide range of topics including:
  • Chinese corporates
  • US payment systems
  • Asian, Indian, and Korean corporates
  • European stainless steel, electric and gas utilities, unregulated utilities, and offshore wind
  • Global base metals and credit card ABS
  • Covered bonds in Asia ex-Japan, Australia, and Italy
  • US municipal pension liabilities and not-for-profit organizations

Additional Notes

• The document emphasizes the impact of regulatory changes, market dynamics, and financial strategies on credit profiles.
• It also notes the importance of cash flow, leverage, and debt management in assessing credit risk.
• Several entities face challenges related to high fixed costs, liquidity, and regulatory scrutiny.