20170918-穆迪服务-CreditOutlook_32页_1mb

Credit Outlook Summary

Core Content Overview

This document provides a comprehensive analysis of credit implications from recent corporate, infrastructure, and banking developments, as well as insights into securitization and market trends. It is divided into sections covering Corporates, Infrastructure, Banks, and Securitization, with detailed commentary on the credit impacts of each event.

Main Points by Section

Corporates

• Coeur Mining's Acquisition of Silvertip:

  • Coeur Mining (B1 stable) acquired Silvertip mine in Northern British Columbia, Canada.
  • The acquisition is credit positive due to geographic diversification and increased production.
  • Initial consideration: $200 million (cash: $146.5M, stock: $38.5M, debt assumption: $15M).
  • Additional $50 million contingent on permitting and exploration milestones.
  • Expected to increase annual production by ~25% and generate ~$70 million in EBITDA by 2019.
  • Leverage is expected to remain within acceptable levels, supported by a strong cash balance of $250 million.

• Pilgrim's Pride Acquires Moy Park:

  • Pilgrim's Pride (Ba3 stable) acquired Moy Park (B1 stable), a UK-based poultry company.
  • The acquisition is credit positive as it diversifies sales, supply chain, and customer base.
  • Funded by $800 million subordinated seller note, $420 million senior notes, and $80 million cash.
  • Pro forma debt/EBITDA is 2.1x, excluding $50 million of cost synergies.
  • Pilgrim's core operating profit margin is expected to rise by 100-200 basis points to ~9% in 2017.
  • The GNP acquisition added ~$460 million in sales and further improves margin mix.

• Gestamp Automocion Issues Profit Warning:

  • Gestamp (Ba2 stable) issued a profit warning due to execution problems in key NAFTA projects.
  • The credit impact is negative as leverage is expected to rise to 3.5x in 2017 and 3.2x in 2018.
  • High project costs and delayed EBITDA growth affect financial performance.
  • First-half results show weakening credit metrics, including negative free cash flow.
  • The company expects slight deleveraging in 2018 but remains exposed to cyclical risks.

Infrastructure

• Invepar Returns Highway Concession to Brazilian Government:

  • Invepar (B2 negative) returned the BR-040 toll road concession to the Brazilian government.
  • The move is credit positive as it aims to improve cash generation and reduce leverage.
  • The concession was affected by lower-than-expected traffic and higher costs, leading to financial strain.
  • Proceeds from the non-depreciated assets will help repay a $950 million bridge loan.
  • The company expects a reduction in its gross debt/EBITDA ratio to 13.2x in 2018 from 14.6x in 2017.

• Other Concessions in Brazil:

  • Several other concessions, such as BR-153, are facing similar challenges.
  • The regulator is considering annuling some of these concessions due to non-compliance.
  • Invepar may avoid such outcomes through a friendly reversal of the BR-040 concession.
  • The company is one of Brazil's largest infrastructure groups with annual revenues of ~BRL3.6 billion.

Banks

• Historical Bank Losses from Hurricanes:

  • Bank losses from Hurricanes Harvey and Irma are expected to be manageable.
  • Banks in affected areas may see increased problem loans and slowed loan production.
  • Past natural disasters showed that losses were lower due to insurance, government aid, and recovery efforts.

• Itaú CorpBanca's Earnings Challenges:

  • Itaú CorpBanca (A3/A3 stable) reported poor earnings due to a troubled project financing (Alto Maipo).
  • The project's technical default and potential delays increase credit risk.
  • The bank's return on assets is below the system average, and profitability has not improved since the merger.
  • The bank's loan book has contracted, and provisioning expenses remain high, affecting capital levels.

• Credit Positive Developments:

  • Grupo Supervielle's Equity Sale:
    • Raised $342 million in primary offering and $132 million in secondary offering.
    • Strengthens capital base and supports growth plans, leading to a credit positive rating.
    • TCE/RWA ratio is expected to rise to ~18.6% if all capital is injected into the bank.
    • Could allow for another 90% growth in the loan book by 2018, maintaining a TCE/RWA ratio of ~11%.
  • France Keeps Livret A Rate at 0.75%:
    • The decision to maintain the Livret A rate is credit positive for French retail banks.
    • Stabilises deposit costs and preserves profitability in a rising interest rate environment.
    • Estimated annual cost savings of ~€920 million for the five largest French banks.

• Rabobank's Sale of Stake in Van Lanschot Kempen:

  • Rabobank (Aa2/Aa2 negative) sold its 9.74% stake in Van Lanschot Kempen for ~€101 million.
  • The sale is credit positive as it helps deleverage the balance sheet.
  • The transaction was at a 4.6% discount to the closing share price.
  • Rabobank no longer holds any stake in Van Lanschot Kempen after the sale.

• Russia Cuts Key Rate, Easing Pressure on Banks:

  • The cut in the key rate is credit positive as it reduces pressure on bank margins.
  • The Central Bank of Russia designated Credit Bank of Moscow as systemically important, a credit positive for the bank.

Key Information

• Credit Positive Events:

  • Coeur Mining's acquisition of Silvertip.
  • Pilgrim's Pride's acquisition of Moy Park.
  • Invepar returning the BR-040 concession.
  • Grupo Supervielle's equity sale.
  • France maintaining the Livret A rate at 0.75%.
  • Rabobank selling its stake in Van Lanschot Kempen.
  • Russia cutting key rate.

• Credit Negative Events:

  • Gestamp's profit warning due to execution problems.
  • Itaú CorpBanca's earnings challenges from Alto Maipo.

• Geographic and Market Focus:

  • The analysis includes developments in the US, Canada, Brazil, Chile, Argentina, France, and the Netherlands.
  • The impact of natural disasters, such as Hurricanes Harvey and Irma, is discussed in the context of US banks.
  • The effects of regulatory changes and economic conditions on credit risk are emphasized.

• Leverage and Liquidity:

  • Leverage levels for companies like Coeur and Gestamp are closely monitored.
  • Liquidity management and capital structure are key factors in assessing credit risk.

• Market Outlook:

  • The document references Moody's Analytics' Weekly Market Outlook as a sister publication.
  • It highlights the importance of market conditions, such as interest rates and economic growth, on credit performance.

Conclusion

The Credit Outlook document outlines both credit positive and negative developments across various sectors. Key credit positive events include strategic acquisitions, regulatory decisions, and asset sales that improve capital structures and reduce leverage. Credit negative events, such as execution problems and earnings challenges, highlight the risks associated with project delays and economic downturns. The analysis underscores the importance of liquidity, leverage, and market conditions in shaping credit risk.