20160829-穆迪服务-Credit_Implications_of_Current_Events_35页_1mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications related to corporate, banking, insurance, sovereign, and public finance developments as of August 2016. It includes assessments of specific transactions and strategic moves that affect the credit profiles of various entities.

Main Viewpoints and Key Information

Corporates

• PDC Energy's Expansion into West Texas

  • Credit Positive: Acquisition of two companies in the Permian Basin for $1.5 billion, adding 57,000 net acres and 700 wells.
  • Expected to maintain a leveraged full-cycle ratio of 1.5x or above.
  • The deal helps diversify geographic risk and avoids potential regulatory risks in Colorado.
  • PDC aims to keep leverage below 2.5x debt/EBITDA.

• BioClinica's Buyout by Cinven

  • Credit Negative: The $1.4 billion acquisition increases leverage to over 7.0x debt/EBITDA.
  • Liquidity remains adequate, but higher interest costs may affect free cash flow.
  • BioClinica is a leader in clinical trial imaging services and expects EBITDA growth.

• Couche-Tard's CST Brands Acquisition

  • Credit Negative: The $4.4 billion acquisition increases debt/EBITDA to 3.7x.
  • Expected to reduce leverage to 2.5x within 24 months.
  • The deal enhances market presence in the US and increases revenue by 26% to $48 billion.

• Svenska Cellulosa's Planned Split

  • Credit Negative: Splitting hygiene and forest products businesses reduces diversification and weakens the forest products segment.
  • Post-split, the forest products business will have less geographic and product diversification.
  • The demerger is subject to shareholder approval in spring 2017.

• Innovia's Divestiture of Cellophane Business

  • Credit Positive: Use of proceeds to reduce debt and improve EBITDA margins.
  • Divestiture reduces leverage to 3.7x debt/EBITDA.
  • EBITDA margins improved from 14.6% to 17.6% after the sale.

• Befesa's Hedging Strategy Change

  • Credit Positive: Shift from options to swaps reduces exposure to zinc price volatility.
  • The company also refinanced non-zinc debt and increased revolving credit facility.
  • Expected to achieve adjusted debt/EBITDA below 5.0x by year-end 2016.

• COFCO HK's Acquisition of Nidera

  • Credit Negative: The acquisition will increase debt/EBITDA to over 7.0x by 2017.
  • Nidera has weak credit quality, and COFCO HK may need to support it financially.
  • The deal is expected to close in Q4 2016.

• Sime Darby's Private Placement of Shares

  • Credit Positive: The MYR2.4 billion raise will improve debt/EBITDA to around 3.5x.
  • The company is focused on deleveraging, with previous debt reductions from asset sales and sukuk issuance.
  • Further reductions are needed to achieve adjusted debt/EBITDA of 3.0x.

Banks

• Caixa Geral de Depositos (CGD)

  • Credit Positive: Recapitalization plan includes €2.7 billion government injection and €900 million conversion of contingent capital securities.
  • The plan is compliant with EU state-aid rules and avoids burden-sharing on debt.
  • CGD's CET1 ratio is weak at 10.0% (as of June 2016), and restructuring is needed for long-term profitability.

• Handelsbanken's Sale of Investment Firm Stake

  • Credit Positive: The sale is a strategic move that reduces financial risk and improves capital efficiency.

• Czech Regulators' Systemic Risk Buffers

  • Credit Positive: Increased buffers for some banks improve their capital resilience and credit quality.

• Kenya Caps Banks' Lending Rates

  • Credit Negative: Caps on lending rates may limit banks' profitability and affect their credit profiles.

Insurers

• US Life Insurers

  • Credit Positive: Variable annuity reserve and capital reform could improve financial stability.

• Higher Automobile Accidents

  • Credit Negative: Impact on earnings for US property and casualty insurers.

• Central Italy Earthquake

  • Credit Neutral: Reduces profitability but does not affect capital for Italian insurers.

Sovereigns

• Jordan's IMF Loan Facility

  • Credit Positive: Boosts government finances and balance-of-payments position.

• Oman's Weak Fiscal Performance

  • Credit Negative: Weak performance in H1 2016 negatively affects its credit outlook.

US Public Finance

• States' Corporate Tax Revenues

  • Credit Negative: Decline in corporate profits leads to lower tax revenues.

• Louisiana's Floods

  • Credit Negative: Local government finances are affected, but federal aid mitigates the impact.

Securitization

• US GSEs' New Application Form
  • Credit Positive: Likely to lead to stronger conforming loan originations, improving the securitization market.

Summary of Credit Implications

• Credit Positive: PDC Energy's expansion, Befesa's hedging strategy, Innovia's divestiture, Sime Darby's private placement, and Handelsbanken's stake sale.
• Credit Negative: BioClinica's buyout, Couche-Tard's CST acquisition, COFCO HK's Nidera purchase, and Oman's fiscal performance.
• Neutral Impact: Central Italy earthquake on Italian insurers, and Kenya's lending rate caps.

Key Entities and Their Ratings

• PDC Energy: B1 stable
• BioClinica: B3 stable
• Couche-Tard: Baa2 stable
• SCA: Baa1 negative
• Innovia: B1 stable
• Befesa: B2 stable
• COFCO HK: A3 review for downgrade
• Sime Darby: Baa1 negative
• CGD: B1/B1 review for downgrade

Notes

• The document does not announce credit rating actions, but provides insights into rating outlooks and credit metrics.
• Some details, such as restructuring plans and exact financing terms, remain uncertain.
• The document includes contact information for analysts and highlights the importance of financial stability and risk management in credit assessments.