20171127-穆迪服务-Credit_OutlookCredit__Implications_of_Current_Events_28页_987kb

Document Summary

Core Content Overview

This document provides a summary of recent credit implications and market analysis from Moody's, focusing on corporate and banking sector developments, as well as sub-sovereign credit updates. It includes evaluations of credit impacts from various events such as bond buybacks, equity financing, legal rulings, and policy changes.

Corporate Sector Highlights

ZF Friedrichshafen AG

• Bond Buyback: ZF announced a $1.3 billion debt buyback, including $425 million of 2020 notes and up to $900 million of notes due 2020-25.
• Credit Impact: The buyback is credit positive as it reduces gross leverage by approximately 0.25x by year-end 2017.
• Financing: Expected to be funded by existing cash and proceeds from the disposal of its BCS business unit.
• Rating Outlook: The move supports the stable outlook on ZF's Ba1 rating, though a revised dividend policy is credit negative.
• Key Metrics:
  • Debt/EBITDA is expected to decline from 4.9x to 3.7x in 2018.
  • EBITDA/interest expense is expected to increase from 1.7x to 2.7x in 2018.
• Rating Conditions: Upward pressure could arise if ZF maintains debt/EBITDA below 3x, EBITA margins above 7%, retained cash flow/net debt above 25%, and free cash flow above €500 million.

Dana Gas PJSC

• Legal Ruling: An English court ruled that Dana Gas' Sukuk Al Mudarabah is valid and enforceable under English law.
• Credit Impact: The ruling is credit positive for sukuk investors and the Islamic finance industry, adding legal certainty.
• Ongoing Legal Battle: Dana Gas will appeal the ruling to the English Court of Appeal and faces an anti-suit injunction in the UAE.
• Industry Implications: The ruling supports the standardization of Shari'ah-compliant sukuk structures and reduces legal uncertainty.

Shelf Drilling Holdings Ltd.

• New Contracts: Shelf Drilling secured three new contracts with ONGC in India, set to begin operations in January 2018.
• Credit Impact: The contracts are credit positive as they improve rig utilization and contract backlog.
• Earnings Outlook: The contracts will help improve earnings and credit metrics in 2018, though visibility is limited beyond that.
• Utilization Trends: Market utilization is expected to drop to 39% in 2019 due to expiring contracts.

Toshiba Corporation

• Equity Financing: Toshiba approved a €600 billion share issuance to eliminate cash obligations related to a US nuclear project.
• Credit Impact: The issuance is credit positive as it improves net worth and reduces leverage.
• Execution Risks: The sale of its memory business (Toshiba Memory Corporation) faces challenges with Western Digital.
• Earnings Dependency: Memories business is a key earnings driver, contributing 88% of consolidated operating profit.
• Rating Outlook: Rating could improve if the share issuance and sale proceed smoothly, or worsen if there are liquidity issues or governance failures.

ABM Investama Tbk

• Tap Issuance: ABM issued $50 million in senior unsecured notes, increasing leverage to 2.7x.
• Credit Impact: The issuance is credit negative due to the increase in leverage.
• Business Focus: Relies heavily on coal mining, which is nearing the end of its life.
• Future Outlook: Proceeds will be used to fund acquisitions to extend mine life, but this will not be immediately earnings accretive.

Lodha Developers Private Limited

• Debt Reduction: Used tap issuance to refinance high-cost short-term debt.
• Credit Impact: The move is credit positive.
• Government Policy: The Indian government expanded interest subsidies for affordable housing, increasing demand.
• Affordable Housing: About 42% of Lodha's projects are in the affordable category, benefiting from tax incentives and lower interest rates.
• Sales Growth: Expected to grow 15%-18% over the next 12 months.

Banking Sector Highlights

EBA Stress Test 2018

• New Rules: The inclusion of IFRS 9 accounting will make the stress test more stringent.
• Credit Impact: Higher provisioning needs and lower CET1 ratios are expected, but the impact is likely limited and digestible.
• Stressed Capital Ratios: Banks with weaker capital positions (e.g., Italy, Portugal) are more vulnerable.
• Capital Requirements: The SRB will set binding MREL targets for the largest euro-area banks, requiring €117 billion in new MREL-eligible liabilities.

Carige's Share Issue

• Underwriting Agreement: Carige announced a €500 million share issue with commitments from existing shareholders.
• Credit Impact: The agreement is credit positive, reducing the risk of supervisory intervention.
• Pricing: New shares priced at €0.01, below peer valuations, to attract new investors.
• Recapitalization: The share issue is part of a broader €1 billion recapitalization plan to reduce problem loans.
• Risk: If the share issue fails, supervisory intervention is likely, potentially leading to a wind-down similar to Veneto banks.

Sub-Sovereign Sector Highlights

Mexico

• Court Ruling: A court ruling on property tax subsidies is credit positive for municipalities.
• Impact: Provides legal clarity and supports local government credit profiles.

Key Takeaways

• Credit Positive Events:
  • ZF's bond buyback
  • Dana Gas' English court ruling
  • Shelf Drilling's new contracts
  • Carige's share issue underwriting agreement
  • Lodha Developers' debt reduction and affordable housing policy
• Credit Negative Events:
  • ABM Investama's tap issuance
  • Turkey's funding rate increase
• Industry Trends:
  • Increased focus on legal and regulatory clarity for Islamic finance instruments
  • Rising competition in the energy and drilling sectors
  • Tightening regulations in China and Malaysia
  • Potential for rating upgrades if companies meet certain financial thresholds
  • Risks from execution delays and liquidity strains

Conclusion

The document outlines the credit implications of various corporate and banking actions, emphasizing the importance of leverage reduction, legal certainty, and regulatory compliance. It highlights both positive and negative developments, with a focus on how they affect credit ratings, financial metrics, and market confidence.