20140728-穆迪服务-Credit_Outlook_50页_1mb

Credit Outlook Summary

Core Content

The document titled "Credit Outlook" from Moody's Analytics provides an analysis of credit implications arising from recent events in various sectors, including healthcare, corporate finance, banking, and others. It highlights both credit negative and credit positive developments across different industries and regions.

Main Points

Credit Negative Implications

• US Healthcare Court Decision:
  A ruling by the DC Circuit Court of Appeals invalidates the IRS regulation allowing subsidies for individuals purchasing insurance on federal exchanges. This decision is credit negative for:

  • US health insurers: Subsidies are crucial for attracting policyholders, and without them, insurers may face higher lapse rates and increased premiums.
  • Hospitals (both for-profit and not-for-profit): The ruling may lead to an increase in uncompensated care, especially for for-profit hospitals with large presences in states reliant on the federal exchange. Not-for-profit hospitals, which already provide more uncompensated care, are also at greater risk.

  States relying on the federal exchange (29 states) or partnership exchanges (7 states) are most affected. Examples include:

  • HCA Holdings, Inc. (B1 positive) with significant operations in Florida and Texas.
  • CHS/Community Health Systems, Inc. (B1 stable) and Tenet Healthcare Corporation (B1 stable) with major operations in Florida, Pennsylvania, and Texas.

• French Regional Debt:
  Rising regional debt in France is a credit negative factor for the country's financial stability.

• Russian Sanctions:
  US sanctions on Russian companies are credit negative for IT vendors like Microsoft, IBM, Cisco, and Oracle, as they may face reduced business opportunities. The Russian government is pushing for local IT providers due to these sanctions, but the domestic market lacks sufficient capacity.

• Ecuador's Monetary and Financial Code:
  The new code is credit negative for Ecuadorian banks due to tighter regulations and increased financial pressure, particularly on profitability and capital adequacy.

Credit Positive Implications

• American Airlines Capital Deployment Plan:
  American Airlines Group Inc. (B1 stable) announced a plan to reduce debt, repurchase shares, and initiate a dividend. This is credit positive as it demonstrates financial discipline and improves liquidity.

• Delta Air Lines' Domestic Crude Oil Contract:
  Delta Air Lines, Inc. (Ba3 positive) signed a contract with Bridger LLC for domestic crude oil, which is expected to save the company about $110 million annually and improve its operating profit margin.

• BCE's Purchase of Aliant:
  Although the acquisition is credit negative for Bell Canada due to increased leverage, it is credit positive for BCE as it increases cash flow and improves operational synergies.

• Alstom's €4 Billion Rail Contract:
  Alstom SA (Baa3 positive) secured a significant contract for commuter trains in South Africa, which is credit positive due to increased revenue and order backlog, leading to sustained growth in the transportation division.

• US Money Market Reforms:
  The reforms are credit positive as they lead to a more conservative and concentrated industry, which could improve stability.

• Bayerische Landesbank's Sale of Hungarian Subsidiary MKB:
  This sale is credit positive for the bank, as it reduces exposure and improves financial health.

• Skipton's Sale of Mortgage-Servicing Subsidiary:
  This sale is credit positive for Skipton, as it removes a potential liability and enhances capital structure.

• Pension Reform in Veracruz, Mexico:
  This reform is credit positive for the region, improving fiscal sustainability.

• Reserve Bank of India's Measures to Drive Economic Growth:
  These measures are credit positive as they are expected to boost economic activity and support financial institutions.

Key Information

• US Healthcare Ruling:
  The ACA subsidy ruling has created uncertainty, with the potential to reduce the number of insured individuals and increase uncompensated care. The Supreme Court is expected to resolve the issue by mid-2015.

• Impact on Insurers:
  Insurers like Aetna, Humana, and WellPoint are at risk due to their reliance on federal exchanges. However, those with significant operations in state-run exchanges are less affected.

• Impact on Hospitals:
  For-profit hospitals in states with federal exchanges are more vulnerable, while not-for-profit hospitals may see a more pronounced decline in revenue due to higher uncompensated care.

• Corporate Actions:
  American Airlines and Delta Air Lines have implemented cost-saving and capital deployment strategies that are beneficial to their credit profiles.

• Banking Sector:
  Ecuador's new financial code introduces tighter regulations, increasing pressure on banks. In contrast, certain bank actions like the sale of subsidiaries and the sale of mortgage servicing are seen as credit positive.

• IT Sector:
  US sanctions on Russia are causing a shift toward local IT providers, which is credit negative for foreign vendors.

• Alstom's Future Outlook:
  The company's transportation division is expected to be its core business post-energy sale, with a projected revenue growth of 5%-8% and improved utilization of production capacity.

Summary of Rating Actions

• Downgraded: Peabody Energy, Vodafone, Laclade Group, Banco Barclays, Pennsylvania.
• Upgraded: Tesoro Logistics, MIPL (Mondrian), Portugal, 116 Mexican enhanced loans.

Research Highlights

• Reports were published on various sectors and regions, including:
  • Twenty-First Century Fox
  • North American manufacturing
  • North American oil and gas
  • Diversified information technology
  • Cable providers
  • Indonesian infrastructure
  • US regulated utilities
  • Peruvian banks
  • Central American banks
  • Austrian banks
  • ASEAN banks
  • Asia-Pacific banks
  • Argentines bond funds
  • Brazilian reinsurance
  • Africa
  • Mongolia
  • Sri Lanka
  • European Bank for Reconstruction and Development
  • Thailand
  • Yucatan Mexico
  • Mexican states
  • Detroit
  • Pennsylvania public higher education
  • San Francisco and the Puget Sound
  • US online higher education
  • Washington state
  • US RMBS
  • US ABS
  • Spain's reperforming loans
  • UK non-conforming RMBS.

Conclusion

The document underscores the importance of regulatory and market changes in shaping credit risk and financial stability. It highlights how policy decisions, corporate strategies, and geopolitical events can have significant implications for different sectors and entities. Overall, while some developments are credit negative, others are credit positive, with the outcome largely dependent on the resolution of legal and regulatory uncertainties.