20160606-穆迪服务-Credit_Outlook_Credit_Implications_Of_Current_Events_36页_1mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications of recent corporate and infrastructure events as of June 6, 2016. It outlines the credit impact of various acquisitions, partnerships, and operational changes on the credit ratings and financial health of the involved entities.

Main Viewpoints

Corporates

• MGM Resorts International

  • Acquired 50% stake in Borgata from Boyd Gaming for $900 million, leading to full control of the property.
  • Credit positive due to increased EBITDA and operational synergy with existing developments.
  • Financing through cash and a bridge loan, expected to be leverage neutral.
  • Adjusted debt/EBITDA is projected to decline to 6.0x by year-end 2016 and 4.8x by year-end 2017.

• Jazz Pharmaceuticals

  • Planned acquisition of Celator Pharmaceuticals for $1.5 billion is credit negative.
  • Increased leverage for Jazz Securities Ltd. (Ba3 negative) and revised outlook to negative from stable.
  • Risks include patent challenges to Xyrem and potential for additional acquisitions to increase leverage.

• Blackboard Inc.

  • Acquired Sequoia Retail Systems for $22 million plus incentives, credit positive.
  • Enhances on-campus sales systems and is fully funded by Providence Equity Partners.
  • Projected 2016 revenue of $650 million, flat relative to 2015.

• Coca-Cola FEMSA (KOF)

  • Acquired 50% of AdeS from Unilever for $575 million in cash, credit positive.
  • Enhances product portfolio without increasing debt burden.
  • Strong liquidity with MXN18 billion on hand, enough to cover 1.5x short-term debt.

• Virgin Australia

  • Strategic alliance with HNA Aviation Group is credit positive.
  • HNA will invest AUD159 million for a 13% equity stake, with potential to increase to 19.99%.
  • Expected to improve adjusted debt/EBITDA to 6.4x-6.6x if equity injection is used for debt repayment.

• Suntory Holdings

  • Sold First Kitchen to Wendy's Japan for a single-digit billion yen, credit positive.
  • Helps reduce leverage and improve cash flow after the Beam acquisition.
  • Continued asset sales expected to streamline operations and focus on core businesses.

• Bridgestone Corporation

  • Proposed acquisition of Speedy France SAS is credit positive.
  • Enhances distribution network in France and strengthens competitive position in Europe.
  • Financial metrics expected to remain within A2 rating parameters.

Infrastructure

• Exelon Corporation

  • Proceeding with the early retirement of unprofitable nuclear reactors in Illinois (Clinton and Quad Cities), credit negative.
  • Early retirement crystallizes liabilities and threatens balance sheets.
  • Potential for parental guarantees on behalf of ExGen, a credit negative for Exelon and its regulated utilities.
  • Expected to improve operating margins by $100 million annually, despite $500 million revenue loss.

• Landis System Operator CVBA

  • Exclusive talks to sell 14% equity stake to State Grid Corporation of China, credit positive.
  • Proceeds will reduce debt and improve financial position.

Banks

• TBC Bank

  • Proposed premium listing on London Stock Exchange is credit positive.
  • Improves capital quality and supports financial stability.

• Investec plc

  • Share placement improves capital quality, credit positive.
  • Supports the bank's financial resilience and credit profile.

• Vietnam's Bank Liquidity and Lending Rules

  • Tightened rules are credit positive, enhancing financial discipline and stability.

Insurers

• Suramericana
  • Acquisition of RSA Mexico is credit positive.
  • Strengthens its position in the Mexican insurance market.

Sovereigns

• Japan
  • Delay in consumption tax increase makes fiscal goals more challenging, credit negative.

US Public Finance

• Housing Finance Agencies

  • HUD's down payment assistance program is credit positive.
  • Supports affordability and housing access, improving credit outlook.

• Chicago's Pension Funding

  • Delayed pension funding is credit negative.
  • Indicates potential financial strain and risks to credit quality.

• Montgomery County, Maryland

  • Property tax increase is credit positive.
  • Enhances fiscal stability and supports long-term financial health.

Key Information

• Credit Positive Events:

  • MGM Resorts acquiring Borgata and sale/leaseback.
  • Blackboard acquiring Sequoia.
  • Coca-Cola FEMSA acquiring AdeS.
  • Virgin Australia's alliance with HNA Aviation.
  • Suntory Holdings selling First Kitchen.
  • Bridgestone acquiring Speedy France.
  • Landis' equity stake sale.
  • TBC Bank's premium London listing.
  • Investec's share placement.
  • Vietnam's tighter bank rules.
  • Montgomery County's property tax increase.

• Credit Negative Events:

  • Jazz Pharmaceuticals' acquisition of Celator.
  • PLDT's acquisition of San Miguel's telecom unit.
  • Exelon's early retirement of nuclear facilities.
  • Chicago's delayed pension funding.
  • Japan's consumption tax delay.

Summary of Financial Impact

• Leverage Reduction:

  • KOF and Suntory Holdings are reducing leverage through asset sales.
  • Landis is reducing debt through equity stake sale.

• Leverage Increase:

  • Jazz and PLDT are increasing leverage through acquisitions, raising credit concerns.

• Operational Synergies:

  • MGM and Bridgestone benefit from operational and market expansion through acquisitions.

• Regulatory and Market Risks:

  • Exelon faces regulatory and political risks due to early retirement of reactors.
  • PLDT's financial metrics are affected by domestic competition and pricing pressures.

• Capital Structure Improvements:

  • Virgin Australia and Investec benefit from capital structure improvements through equity injections and share placements.

• Market Access and Growth:

  • Virgin Australia and Bridgestone gain access to new markets, enhancing long-term growth prospects.

• Fiscal Challenges:

  • Japan's sovereign credit is challenged by the delayed tax increase.
  • Chicago's pension funding delay is a credit negative for local governments.

Conclusion

The credit outlook highlights a mix of positive and negative implications based on corporate strategies, financial decisions, and market dynamics. While some entities benefit from strategic acquisitions, asset sales, and capital structure improvements, others face challenges due to increased leverage, regulatory pressures, and operational risks. The analysis underscores the importance of liquidity, leverage, and market positioning in assessing creditworthiness.