20161027-穆迪服务-CreditOutlook_19页_1mb

Credit Outlook Summary (27 October 2016)

Core Content

This document provides an overview of credit implications related to recent corporate, banking, and sovereign developments. It includes analysis from Moody's analysts on how these events may affect credit ratings and financial stability.

Main Points

Corporates

• HNA Tourism's 25% Stake in Hilton:

  • HNA's acquisition of a 25% stake in Hilton is credit positive for Hilton.
  • This reduces Blackstone's stake from 46% to 21%, and HNA will take two board seats.
  • HNA's involvement is expected to boost Hilton's presence in the Asia-Pacific region, especially in China.
  • The transaction is expected to close in early 2017, following the spinoff of Hilton Grand Vacations Inc. and Park Hotels and Resorts Inc.
  • HNA's expertise in the Chinese market will benefit Hilton's timeshare business, particularly in Hawaii.

• Bombardier Workforce Reduction:

  • Bombardier plans to cut about 10% of its global workforce, reducing headcount by 14,500.
  • The job cuts are credit positive, providing annual savings of up to $600 million by 2018.
  • These savings will help the company reach its target EBIT margin of 7%-8% by 2020.
  • Despite the high adjusted leverage of 11x, Bombardier's liquidity is strong enough to absorb the incremental cash usage of $450 million.
  • The company has $3.34 billion in cash and $1.0 billion in available revolving credit facilities.
  • Free cash flow is expected to improve as the CSeries production ramps up and the Global 7000 program enters service in late 2018.

• British American Tobacco's Acquisition of Reynolds American:

  • The proposed $47 billion acquisition will increase BAT's leverage.
  • We placed BAT's A3 rating on review for downgrade.
  • Pro forma leverage is expected to rise to 4.7x from 3.1x by December 2016.
  • However, we anticipate some deleveraging before the transaction's close in 2017.
  • The acquisition will strengthen BAT's market position, particularly in the US, where it will hold 34.9% of the market share.
  • It will also enhance BAT's cash flow generation, allowing for potential deleveraging.

• DomusVi's Acquisition of SARquavitae:

  • The acquisition is credit positive, increasing DomusVi's exposure to Spain's growing nursing home market.
  • Pro forma for the acquisition, Spain will account for 40% of DomusVi's EBITDA, up from 20%.
  • The deal will improve DomusVi's regional diversification and market share in Spain.
  • We affirmed DomusVi's B1 rating following the announcement.
  • The company plans to finance the acquisition with €322 million in senior secured notes and €94.1 million in equity.

• Alain Afflelou's IPO and Capital Structure Revamp:

  • Afflelou filed for an IPO and secured a new €270 million senior term loan.
  • The IPO is credit positive, as it will help reduce leverage and interest costs.
  • We placed all of Afflelou's ratings on review for upgrade.
  • Pro forma debt/EBITDA is expected to decrease to below 4.5x from 6.3x.
  • The company's adjusted interest cover is projected to improve to above 4.5x from 1.8x.
  • However, challenges like geographic concentration and limited growth prospects may constrain any rating uplift.

• Aldi, Coles, and IGA's Market Share Gains in Australia:

  • Aldi, Coles, and IGA have increased their market share at Woolworths' expense.
  • Woolworths lost 1.4 percentage points of market share, while Coles gained 0.9 and IGA 0.3.
  • This trend is credit negative for Woolworths and credit positive for Wesfarmers (Coles' parent).
  • Aldi's discount model has driven industry-wide price reductions and margin compression.
  • Aldi's expansion at 16% annually is outpacing Coles and Woolworths, which are expected to grow at 2% and 3% respectively.
  • Aldi's market share in Australia is expected to continue increasing, surpassing IGA to become the third-largest operator.

Banks

• Ameritrade's Acquisition of Scottrade:

  • The $4.0 billion acquisition is credit positive for both AMTD and Scottrade.
  • AMTD's scale will increase, enhancing its competitiveness in the consolidating brokerage industry.
  • The transaction is expected to increase AMTD's customer accounts by 44% and customer assets by 22%.
  • Scottrade's credit quality is expected to improve by joining a more creditworthy institution.
  • TD Bank will acquire Scottrade Bank for $1.3 billion, enhancing its liquidity and funding.

• TD's Acquisition of Scottrade Bank:

  • The $1.3 billion cash acquisition will increase TD's sweep deposits by 30%.
  • It will improve TD's liquidity and funding profile, adding to its high-quality liquid assets.
  • TD is expected to redeploy the incremental deposits into high-quality liquid assets.
  • The transaction is part of a broader consolidation trend in the US brokerage industry.

Sovereigns

• Colombia's Tax Reform Proposal:
  • The reform is expected to raise additional revenues equal to 0.8% of 2017 GDP and up to 2.7% of GDP by 2020.
  • It aims to broaden the tax base and reduce informality, which is a credit positive.
  • If approved, the reform will help Colombia meet its fiscal targets and maintain a stable debt/GDP ratio.
  • We expect the reform package to be approved, though possibly with some modifications.
  • Without the reform, the government would face significant expenditure cuts starting in 2018.

US Public Finance

• New Mexico's Reduction of State Aid for Higher Education and Public Schools:
  • This move is credit negative for New Mexico.
  • It reflects the state's budget crisis and may impact public education and school systems.
  • The decision could lead to reduced funding for these sectors, affecting long-term economic stability.

Key Information

• The document is a Moody's Analytics publication and does not announce credit rating actions.
• For any referenced credit ratings, users are directed to Moody's website for the most updated information.
• The summary includes analyses from various Moody's analysts across different sectors.
• The report highlights both credit positive and credit negative developments, emphasizing the impact on financial stability and liquidity.