20170213-穆迪服务-Credit_Implications_of_Current_Events_30页_1mb

Credit Outlook Summary

Core Content Overview

This document provides an analysis of credit implications stemming from various current events affecting corporations, infrastructure, banks, insurers, and sub-sovereigns. The analysis is conducted by Moody's Analytics, highlighting credit positives and negatives based on financial performance, restructuring efforts, government support, and regulatory changes.

Main Points by Sector

Corporates

• The Coca-Cola Company (Aa3 stable):

  • Reported a 56% drop in fourth-quarter 2016 net income, but core earnings were strong.
  • Organic revenue growth was 6% for Q4 and 3% for the full year.
  • Adjusted operating margin expanded by nearly 140 basis points.
  • Despite high gross leverage, net leverage remains stable at about 2x.
  • Credit positive due to strong brand, diverse operations, and cash generation.

• Sears Holdings Corp. (Caa2 stable):

  • Implemented a $1 billion cost-cutting plan to improve liquidity.
  • Plans include real estate sales, a $500 million loan facility, and brand sales.
  • Despite liquidity improvements, continued asset depletion is a credit negative.
  • High debt and unfunded pension obligations remain a concern.
  • Credit positive due to efforts to stabilize operations, but core issues persist.

• Bombardier Inc. (B2 stable):

  • Received $372.5 million in government support for production ramp-ups.
  • Has strong liquidity with $3.4 billion in cash and $1 billion in revolving credit.
  • High adjusted leverage (11x) and expected negative free cash flow.
  • Credit positive due to government support, but uncertain terms may pose risks.

• Arca Continental (A2 negative):

  • Secured exclusive bottling rights in the US through a $20% stake in a new subsidiary.
  • Transaction is credit positive, increasing geographic diversification and US dollar revenue.
  • Adjusted debt/EBITDA will decrease to 1.5x by 2017.
  • Credit metrics remain strong with EBIT/interest ratio at 6.0x.

• A.P. Moller-Maersk A/S (Baa2 negative):

  • Cut dividends by 53% to improve cash flow and maintain investment grade.
  • Dividend reduction is credit positive, reducing negative free cash flow.
  • Transitioning to a pure-play transportation company.
  • Credit positive due to strategic financial decisions and long-term stability.

• GEA Group Aktiengesellschaft (Baa2 stable):

  • Announced a €450 million share buyback, which is credit negative due to liquidity consumption.
  • Share buyback is unlikely to affect its rating as it has strong liquidity and conservative financial policy.
  • Expected to use proceeds from past asset sales to fund the buyback.

• Pakistan Mobile Communications Limited (Jazz, B1 stable):

  • Affected by a guaranteed bridge loan from parent company GTH.
  • Dividend payments to GTH will reduce Jazz's liquidity and free cash flow.
  • Credit negative due to potential dividend pressure and uncertainty in repayment sources.
  • GTH has access to a revolving credit facility with VimpelCom, reducing immediate risk.

• Genpact Limited (Baa3 stable):

  • Acquired Fiserv's Australian assets, a credit positive.
  • Diversifies revenue and reduces reliance on North America.
  • Acquisition price is expected to be within $10–40 million, well within its financial capacity.
  • Credit positive due to strategic expansion and access to industry-leading processes.

Infrastructure

• California Utilities:
  • PG&E, SDG&E, SCE, and SoCalGas seek an extension of cost-of-capital revision to 2019.
  • The extension would allow them to maintain current capital structures and ROEs.
  • Credit positive as it provides cash flow certainty and preserves ROEs.
  • Regulatory decoupling supports financial stability and reduces pressure to increase sales.

Banks

• German Banks:

  • Increased provisioning on ship loans, a credit negative.
  • Indicates heightened risk in shipping sector, affecting coverage ratios.
  • Likely to impact credit quality due to higher provisions and lower returns.

• Romanian Banks:

  • Court rejected bill converting Swiss Franc mortgages to local currency, a credit positive.
  • Prevents currency risk and maintains financial stability for banks.

Insurers

• Anthem and Cigna Merger:

  • Ruling to block the merger is credit positive for both.
  • Reduces consolidation risk and preserves market competition.

• Aon:

  • Sale of benefits administration business is credit negative.
  • Likely to reduce earnings and cash flow, affecting financial stability.

Sub-sovereigns

• Russian Regions:
  • Reported first sector-wide budget surplus since 2011, a credit positive.
  • Indicates improved fiscal health and potential for future investment.

Securitization

• RMBS Credit Quality:

  • Repeal of Dodd-Frank Act's mortgage provisions would weaken RMBS credit quality.
  • Credit negative due to reduced regulatory oversight and increased risk.

• Equipment ABS Tied to Agriculture Loans:

  • US government's farm income forecast is credit positive for equipment ABS.
  • Suggests strong demand and repayment capacity in the agricultural sector.

Covered Bonds

• Norway's Covered Bond Policy:
  • Proposal to increase minimum overcollateralization is credit positive.
  • Enhances investor confidence and reduces risk exposure.

Key Information

• The document covers a range of credit implications across different sectors, including corporations, infrastructure, banks, insurers, and sub-sovereigns.
• Credit positives include strong core earnings, government support, cost-cutting initiatives, and strategic acquisitions.
• Credit negatives include liquidity concerns, asset depletion, increased provisions, and share buybacks.
• The analysis is based on financial metrics, regulatory changes, and market conditions.
• Moody's provides ratings and outlooks for each entity, with detailed financial forecasts and implications.

Recent Updates

• The document references recently published articles in the Credit Outlook and links to the Weekly Market Outlook for additional insights.
• Some events, such as the Canadian government's support for Bombardier and the US farm income forecast, have significant implications for credit quality and market stability.