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Credit Outlook Summary

Core Content

The document provides an analysis of credit implications from various corporate and market events, focusing on how acquisitions, market conditions, and financial strategies affect credit metrics and ratings. It includes insights from Moody's analysts on different sectors and entities, highlighting credit positive and negative outcomes based on financial and operational factors.

Main Points

Corporates

• Honeywell's Acquisition of Elster: Credit positive due to enhanced offerings in environmental and combustion control, potential cost synergies, and strong liquidity. Pro forma debt/EBITDA is expected to remain within acceptable ranges for its A2 rating.
• UPS's Acquisition of Coyote Logistics: Credit negative due to high EBITDA multiple (18x) and potential margin dilution. The transaction is expected to modestly increase debt/EBITDA to 4.0x and slightly reduce EBITA/interest to 8x.
• Delphi's Acquisition of HellermannTyton: Credit negative as it increases leverage and dilutes margins. Pro forma debt/EBITDA is projected to rise to 2.00x, and EBITA/interest to fall to 8x. However, integration risks are considered low.
• Wabtec's Acquisition of Faiveley Transport: Credit positive due to expansion in non-US markets and diversification. Despite margin dilution, Wabtec is expected to reduce leverage to 1.5x by 2016.
• Votorantim Cimentos' Legal Issues: Credit negative due to the threat of liquidity stress from a large fine and asset divestment. The company may need to tap its revolving credit facility to meet obligations.
• Solvay's Acquisition of Cytec: Credit negative for both companies. Solvay faces increased leverage, while Cytec faces uncertainty in debt assumption. The deal is strategic but poses risks to credit metrics.
• GKN's Acquisition of Fokker Technologies: Credit positive, as it enhances product offerings and strengthens the aerospace division. Debt/EBITDA will slightly increase to 3.3x, but free cash flow will support debt reduction.
• FQM's Credit Metrics: Credit negative due to falling copper prices, Zambian power shortages, and high capex spending. These factors are expected to weaken EBITDA, increase debt, and reduce free cash flow.

Infrastructure

• SSE's Acquisition of Gas Assets: Credit positive, as it improves internal sources of supply.
• ENGIE's Nuclear Contribution Reduction: Credit positive due to reduced nuclear contribution and reactor extension, improving financial flexibility.

Banks

• Banco PSA and Santander (Brasil) Car Loan Partnership: Credit positive, as it enhances funding and reduces risk.
• Guatemala's Economic Confidence: Credit negative for banks due to weakened economic outlook.

Insurers

• Sirius Group's Sale to China Minsheng: Credit negative due to loss of control and potential reputational damage.
• Argentina's New Civil and Commercial Code: Mixed implications for insurers, with potential regulatory changes affecting operations.

Sovereigns

• Ireland's First-Quarter Growth: Credit positive due to strong economic performance.
• Slovenia's Privatisation Strategy: Credit positive as it builds momentum and improves fiscal health.

US Public Finance

• Michigan Supreme Court Pension Reforms: Credit positive as it supports the state's financial position.
• Glendale, Arizona Subsidy Renegotiation: Credit positive due to reduced financial burden on the city.

Key Information

Rating Changes

• Downgraded: Advanced Micro Devices, Teva Pharmaceutical Industries
• Upgraded: Michigan, Southeast Housing, 26 US subprime RMBS

Research Highlights

• Reports published on a wide range of topics including US homebuilders, Asian corporates, European alcoholic beverage manufacturers, US chemicals, and more.

Recently in Credit Outlook

• Articles from the previous Thursday's edition are referenced, though the content is not detailed in this summary.

Summary of Credit Implications

Conclusion

The summary highlights a mix of credit positive and negative outcomes across various sectors and entities. Key drivers include acquisition strategies, market conditions, regulatory changes, and operational performance. While some companies benefit from strategic expansions and strong liquidity, others face challenges such as high valuations, margin pressures, and legal or financial obligations that could strain their credit profiles.