20180611-穆迪服务-Credit_Outlook_Credit_lmplications_of_Current_Events_34页_1mb

CreditOutlook Summary

Core Content Overview

This document provides an analysis of credit implications stemming from recent corporate, infrastructure, banking, and other financial developments. It highlights both credit negative and credit positive events, assessing their impact on the creditworthiness of various entities. The summary includes key ratings, financial metrics, and strategic moves affecting credit profiles.

Main Points and Key Information

Corporates

• Chewy's release as guarantor of PetSmart debt is credit negative, as it reduces the collateral pool for PetSmart's secured creditors and could lead to a distressed exchange.
• Conduent's credit agreement amendment and non-core asset sales are credit positive, as they reduce interest costs and leverage.
• Ryerson's acquisition of Central Steel & Wire is credit negative, due to increased leverage and reduced liquidity.
• Fortive's acquisition of Johnson & Johnson's ASP unit is credit negative, as it will increase leverage, though the company is expected to reduce it in 2019.
• Profesional Telekomunikasi Indonesia's (Protelindo) acquisition of PT Komet Infra Nusantara is credit positive, enhancing market position and financial profile.

Infrastructure

• Entergy Corporation's $1 billion equity issuance is credit positive, as it helps mitigate the negative impact of federal tax reform and improves cash flow to debt ratios.
• Greenko Energy Holdings' equity raise and acquisition are credit positive, adding operational capacity and strengthening financial profile.

Banks

• Italy's proposal to ring-fence investment banking operations is expected to have limited effects on Italian banks due to minimal capital market exposure.
• Italy's proposal to unwind mutual-bank reform is credit negative, as it could impact the stability of the banking sector.
• MUFG and Mizuho's recovery of ¥200 billion from Sharp is credit positive, improving their liquidity and financial health.

Accounting

• FASB is moving toward finalizing improved accounting for long-duration insurance contracts, which may affect financial reporting and credit analysis for insurance companies.

Asset Managers

• Fortress's re pricing and debt reduction is credit positive, improving its leverage and financial position.
• Invesco's acquisition of Intelliflo is credit positive, enhancing its business profile and financial flexibility.

Sovereigns

• Mexico's tariffs on US goods have marginal macroeconomic impact but signal strained bilateral relations.
• Argentina's preliminary agreement with the IMF is expected to support funding, fiscal consolidation, and independent monetary policy.
• Ukraine's anti-corruption court legislation is credit positive, improving prospects for IMF funding.

US Public Finance

• Illinois' pension buyout plan is credit positive, but relies on savings, posing modest budget risk.
• Illinois Schools' increased state aid is credit positive, reflecting improved financial support for education.

Structured Finance

• Slovakian bank's conversion of old covered bonds is credit positive, indicating improved financial flexibility.

Credit In Depth

Problem Loans in European Banks

• Nonperforming loans are declining across Europe, but progress is uneven.
• Some banks still face idiosyncratic weaknesses and sluggish growth, affecting creditworthiness.
• The impact of problem loans on credit metrics varies by region and bank size.

Fortive's Acquisition of ASP

• The $2.7 billion acquisition is credit negative due to increased leverage.
• The transaction is expected to raise adjusted debt/EBITDA to 3.34x in 2018, which is weak for Baa-range.
• Free cash flow to debt ratio is expected to fall to 17.4% in 2018, consistent with Baa1 rating.
• The acquisition is expected to improve financial profile in 2019.

Protelindo's Acquisition of KIN

• The IDR1.4 trillion all-cash acquisition is credit positive, enhancing market position and financial stability.
• Post-acquisition, Protelindo will remain the largest independent tower operator in Indonesia with a 19% market share.
• The company's pro forma leverage remains at 2.0x-2.2x in 2018-19, supported by operational EBITDA accretion.
• Protelindo's management is selective and committed to maintaining investment-grade metrics.

Recently in Credit Outlook

• The document references recent articles from the Credit Outlook, though the specific content is not detailed.
• It also mentions a sister publication, the Weekly Market Outlook, which contains Moody's Analytics' financial predictions and economic releases.

Ratings and Analysis

• PetSmart: Credit negative due to weakened collateral and uncertain leverage reduction.
• Conduent: Credit positive with improved leverage and cost reduction.
• Ryerson: Credit negative due to increased leverage and reduced liquidity.
• Fortive: Credit negative initially, but expected to improve in 2019.
• Protelindo: Credit positive with strong balance sheet and low leverage.
• GEH: Credit positive with expansion and shareholder support.
• Entergy: Credit positive with equity issuance to offset tax reform impact.
• Italy's banks: Limited credit impact from ring-fencing proposals.

Financial Metrics and Projections

• PetSmart: Expected to have a lease-adjusted debt/EBITDA of over 8.0x in 2018, up from 5.4x before the Chewy acquisition.
• Conduent: Pro forma debt/EBITDA is expected to fall below 3x in 2018.
• Protelindo: Free cash flow to debt ratio is expected to be 4.6% in 2018, down from 7.0% a year ago.
• GEH: EBITDA expected to increase by $130 million in the first full year after the acquisition.
• Entergy: CFO-to-debt ratio expected to be around 12% in 2018, up from 10% without the equity issuance.

Conclusion

The document outlines a range of credit implications across various sectors, with a mix of credit positive and credit negative developments. It emphasizes the importance of financial metrics, strategic moves, and regulatory changes in assessing creditworthiness. Key entities such as PetSmart, Conduent, and Protelindo are analyzed for their financial health and credit outlook.