20161212-穆迪服务-Credit_Outlook_23页_1mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications of various corporate, infrastructure, and sub-sovereign events as of December 12, 2016. It outlines how different transactions and strategies affect the credit profiles of companies and entities, with a focus on leverage, liquidity, and financial risk.

Main Points by Sector

Corporates

• Go Daddy's Acquisition of Host Europe Group

  • Impact: Credit negative
  • Reason: Fully debt-funded acquisition, increasing leverage to 5.1x (from 2x)
  • Outlook: Ba3 stable, outlook changed to stable from positive
  • Details:
    • Acquisition of HEG for $1.79 billion
    • Retains HEG's mass-market Web services business
    • Plans to divest HEG's managed hosting services
    • High integration risk due to large customer base
    • Unlevered cash flow expected to grow by 20% in 2017

• Roper Technologies' Acquisition of Deltek

  • Impact: Credit negative
  • Reason: Debt-funded acquisition, increasing debt to €6.1 billion
  • Outlook: Senior unsecured rating downgraded to Baa3 from Baa2
  • Details:
    • Acquisition for $2.8 billion
    • Debt/EBITDA ratio expected to increase to nearly 4x
    • Strong cash flow generation, with €900 million free cash flow expected in 2017
    • M&A remains central to strategy, but at a sustainable leverage level

• Localiza's Acquisition of Hertz Brazil

  • Impact: Credit positive
  • Reason: Boosts brand exposure and scale without weakening credit quality
  • Details:
    • Estimated cash transaction of BRL337 million
    • Combines brands as Localiza Hertz
    • No significant impact on liquidity or leverage
    • Expected 7.5% increase in fleet size and revenues

• Solvay's Sale of Acetow Unit

  • Impact: Credit positive
  • Reason: Proceeds will be used to deleverage
  • Details:
    • Sold Acetow for €1 billion (7x EBITDA)
    • Expected to reduce net debt/EBITDA to 3.0x from 3.5x
    • Synergies from Cytec merger help maintain EBITDA stability
    • Acetow's EBITDA margin is 25%, but it is a low-growth, commoditised business

• Ahold Delhaize's Share Buyback Program

  • Impact: Credit negative
  • Reason: Reduces cash and may fund price cuts
  • Details:
    • €1 billion buyback program announced
    • Strong cash balance of €3.5 billion and expected €1.6 billion free cash flow in 2017
    • Share buyback aligns with Ahold's pre-merger shareholder-friendly policy
    • Synergies expected to be €500 million by 2019

• Mauser Subsidiary's Acquisitions

  • Impact: Credit positive
  • Reason: Improves geographic footprint and reduces leverage
  • Details:
    • Acquired Total Container Group and Advantage IBC
    • Funded through existing cash reserves
    • Expected post-synergy leverage of 6x (from 7x)
    • Strong integration track record with over 30 acquisitions in 10 years

• Guangzhou R&F's Korean Ventures

  • Impact: Credit negative
  • Reason: Increases financial leverage and business risks
  • Details:
    • Joint venture with Caesars Korea for a resort in Incheon
    • Investment costs estimated at $1.0-$1.2 billion
    • Company has sufficient cash to cover the investment
    • Funding will be in stages, limiting immediate impact on leverage

Infrastructure

• Consumers Energy and Entergy's Early Closure of Palisades Nuclear Plant

  • Impact: Credit positive
  • Reason: Reduces long-term business risk and costs
  • Details:
    • Termination of PPA in 2018 instead of 2022
    • Consumers saves up to $45 million annually
    • Entergy gains from retiring a costly plant
    • Total value of the transaction is $344 million
    • Entergy plans to decommission the plant and reduce its nuclear footprint

• ViaLagos Extends Toll Road Concession

  • Impact: Credit positive
  • Reason: Increases debt service coverage ratio and concession life
  • Details:
    • 10-year extension to 2047
    • Debt service coverage ratio expected to rise to 2.2x
    • Road system serves a tourist-heavy region in Rio de Janeiro
    • Concession life coverage ratio improves to 3.3x
    • Ratings constrained by Brazil's economic outlook

Insurers

• Liberty Mutual's Acquisition of Ironshore
  • Impact: Credit negative for Liberty Mutual, positive for Ironshore
  • Reason: Acquiring a lower-rated insurer increases financial risk
  • Details:
    • Liberty Mutual's credit profile weakens
    • Ironshore's credit outlook improves

Security Firms

• UK's Proposed Contracts-for-Difference Trading Rules
  • Impact: Credit negative
  • Reason: Regulatory changes increase compliance and operational costs
  • Details:
    • Spread-betting firms face stricter rules
    • May impact their ability to manage risk and liquidity

Sub-sovereigns

• Brazilian States Benefit from Federal Revenue Transfer
  • Impact: Positive
  • Reason: BRL5 billion federal revenue transfer improves state finances
  • Details:
    • Supports infrastructure and public services
    • Reflects federal government's fiscal policy

Key Information

• Credit Ratings: The document references Moody's corporate family ratings and adjusted financial metrics.
• Leverage: Several companies are impacted by changes in leverage, with some showing improvement (e.g., Solvay, Mauser) and others facing deterioration (e.g., Go Daddy, Roper).
• Debt Funding: Many acquisitions are financed through debt, which increases financial risk.
• Strategic Shifts: Companies like Go Daddy and Roper are shifting towards larger acquisitions, which may affect their credit profiles.
• Liquidity: Despite acquisitions, companies like Localiza and Solvay maintain strong liquidity positions.
• Synergies and Integration: Integration of acquired businesses is a key factor in determining credit implications.
• Regulatory and Market Risks: Regulatory changes and market conditions (e.g., tourism, energy prices) play a significant role in credit assessments.

Recent Analysis

• The document includes recent updates and analyses from Moody's credit officers, highlighting the impact of specific transactions on credit quality.
• Each analysis includes detailed financial projections, leverage ratios, and market context.
• The focus is on how each event affects the company's ability to service debt and maintain financial stability.

Conclusion

The document provides a comprehensive assessment of how various corporate and infrastructure transactions affect credit risk, emphasizing the importance of leverage, liquidity, and strategic integration. It highlights both credit positive and negative outcomes, offering a balanced view of financial implications for different sectors.