20140721-穆迪服务-Credit_Outlook_Credit_Implications_of_Current_Events_57页_1mb

CreditOutlook Summary

Core Content

This document provides an analysis of credit implications from various current events, focusing on corporate, infrastructure, banking, insurance, sovereign, and sub-sovereign sectors. It outlines the credit impact of legislative changes, business transactions, and regulatory decisions, and includes rating changes and research highlights from Moody's Investors Service.

Main Points

Corporate Sector

• US Highway Bill (HATF): Defers $51 billion in pension contributions, which is initially credit positive for companies due to improved liquidity. However, this benefit is temporary and may turn negative if companies fail to address underlying liquidity issues or misuse the savings.
• Bonus Depreciation Bill: Making bonus depreciation permanent is credit positive for US utilities and telecommunications companies. It results in tax benefits that improve cash flow and leverage metrics, with estimated benefits of $9 billion and $6 billion respectively for these sectors.
• Reynolds' Acquisition of Lorillard: Credit negative due to increased leverage and potential antitrust issues. The deal may require further concessions to satisfy regulatory concerns.
• Albemarle's Acquisition of Rockwood: Credit negative for Albemarle due to increased leverage, but credit positive for Rockwood as it benefits from the acquisition and Albemarle's guarantee of its debt.
• Whiting's Acquisition of Kodiak: Credit positive for Whiting as it enhances its position in the Williston Basin and improves operational efficiencies. However, leverage metrics will increase.
• Weatherford's Sale of Russian and Venezuelan Rigs: Credit positive as the sale reduces debt and improves the quality of the remaining drilling fleet, shifting focus to more stable and profitable regions.

Infrastructure Sector

• AES Cancellation of Generation Asset Sale: Credit negative for AES as it delays deleveraging and exposes DPL to volatile unregulated markets.
• Kyushu's Nuclear Reactor Safety Approval: Credit positive for Kyushu Electric Power Company as it marks a critical step towards restoring operating profits and restarting nuclear operations.

Banking Sector

• Royal Bank of Canada's NVCC Subordinated Debt: Credit positive for senior bondholders.
• BTG Pactual's Acquisition of BSI: Credit positive for the combined entity.
• ECB's Asset Quality Review Transparency: Positive move for market confidence.
• New US Sanctions on Russian Banks: Credit negative for Vnesheconombank and Gazprombank.
• SMBC Aviation Capital's Aircraft Orders: Credit negative for SMBC and SMFG due to increased capital expenditure.

Insurance Sector

• GSE Mortgage Insurer Eligibility Requirements: Credit positive for policyholders.
• Ontario Cost Reduction Legislation: Credit positive for the province's auto insurers.

Sovereigns

• Barbados: Credit negative due to fiscal challenges and economic weakness.
• Bosnia and Herzegovina: Credit negative due to flood damage affecting the government's balance sheet.

Sub-sovereigns

• Yucatán, Mexico: Credit positive due to pension reform.

US Public Finance

• California Water Use Restrictions: Credit negative for state water utilities.
• Most New York Counties: Credit negative due to weak sales tax growth.

Key Information

• HATF Impact: The bill defers $51 billion in pension contributions, which can improve short-term liquidity but may not resolve long-term credit issues.
• Bonus Depreciation: Provides significant tax benefits, especially to energy, utilities, and telecom sectors, leading to improved cash flow and leverage ratios.
• Reynolds & Lorillard Deal: Large-scale acquisition with potential antitrust issues and execution risks.
• Albemarle & Rockwood: The acquisition is credit negative for Albemarle but credit positive for Rockwood.
• Weatherford's Strategic Sale: Reduces debt and improves asset quality, supporting its deleveraging strategy.
• Kyushu's Nuclear Approval: A positive development for Kyushu's credit quality and future profitability.
• Rating Changes: Moody's downgraded several entities and upgraded others, reflecting changes in financial health and creditworthiness.

Research Highlights

• Moody's published reports on various sectors including US retail, food and beverage, tobacco, mining, and banks.
• Reports also covered European RMBS, US subprime auto lenders, and other financial instruments.

Rating Actions

• Downgraded Entities: Aerostar Airport, Metropistas, BES Investment do Brasil, Espirito Santo Financial Group, Kedr Bank, People's United Financial, Khan Bank, XacBank, Trade and Development Bank of Mongolia, Mongolia, and the University of Chicago.
• Upgraded Entities: Avis Budget Group, Metropolitan Edison, Monongahela Power, Ohio Edison, Pennsylvania Power, Potomac Edison, West Penn Power, Exchequer Partnership (No. 2), Reliance Rail Finance, Banco CEISS, E. Sun Commercial Bank, and Rimac Seguros y Reaseguros.

Conclusion

The credit outlook is mixed, with some sectors and entities experiencing positive impacts from legislative changes and strategic business decisions, while others face credit risks due to increased leverage, regulatory scrutiny, and financial constraints. Moody's continues to monitor and assess these developments to provide updated credit ratings and analyses.