20141201-穆迪服务-Credit_Outlook_Credit_lmplications_of_Current_Events_35页_1mb

Credit Outlook Summary - 1 December 2014

Core Content

The Credit Outlook report from Moody's Analytics provides an analysis of credit implications related to recent events across various sectors including Corporates, Infrastructure, Banks, and Insurers, as well as Sub-sovereigns. It also includes Rating Changes and Research Highlights. The report evaluates how these developments affect the credit profiles of companies and entities, with a focus on leverage, liquidity, profitability, and regulatory impacts.

Main Points and Key Information

Corporates

• HealthSouth's Encompass Deal:

  • HealthSouth (Ba3 stable) will acquire Encompass Home Health and Hospice for ~$750 million.
  • The deal is credit negative due to increased leverage and exposure to Medicare reimbursement.
  • Adjusted debt/EBITDA is expected to rise from 2.7x to 3.5x, though likely to remain in the 3.3x range.
  • Medicare reimbursement accounts for ~75% of HealthSouth's revenue and is being reduced over four years.
  • The acquisition could reduce reliance on inpatient rehabilitation to ~82% of net revenue.
  • Synergies and coordinated post-acute-care offerings may offset some risks.

• China Metallurgical Group (CMGC):

  • CMGC (Baa3 stable) plans to sell its 40% stakes in two real estate companies in Nanjing for RMB1.38 billion.
  • The sale is credit positive, helping reduce debt leverage and strengthen the balance sheet.
  • CMGC's debt/EBITDA is expected to fall from 7.5x to 7.0x, and EBITDA margin to improve to ~10%.
  • Proceeds will be used to reduce debt, replenish working capital, and develop other real estate projects.

Infrastructure

• Energisa S.A.:
  • Energisa (Ba2 negative) will sell its power plant assets to Sao Joao Energetica S.A. (unrated) for BRL1.7 billion.
  • The transaction is credit positive, leading to improved leverage and liquidity ratios.
  • Pro forma net debt/EBITDA will decline to ~4.0x from 5.9x.
  • Current ratio is expected to improve to ~1.5x from 0.9x.
  • The assets sold include operational and under-construction projects with a total capacity of 488 MW.

Banks

• ECB Reduces Haircuts on Greek Banks' Collateral:

  • The ECB reduced haircuts on Greek government bonds and guarantees, providing Greek banks with an additional liquidity buffer of up to €7 billion.
  • This is a credit positive move for Greek banks.
  • Haircuts on T-bills, GGBs, and government guaranteed instruments were reduced by over 50%.
  • Greek banks have significantly reduced their ECB funding balances, now at ~€42 billion as of September 2014.

• Dutch Bank Resolution Legislation:

  • The Dutch government released draft legislation to implement the European Bank Recovery and Resolution Directive (BRRD).
  • This is credit negative for bondholders due to the inclusion of burden-sharing with unsecured creditors.
  • The legislation reduces flexibility for the national government, potentially leading to more severe losses for senior creditors in future bank failures.

• China's Rate Reduction:

  • The People's Bank of China reduced benchmark lending and deposit rates, which is credit negative for banks.
  • The reduction in the loan-to-deposit spread (from 2.70% to 2.30%) pressures profitability.
  • Banks may be incentivized to make riskier loans to maintain margins.
  • This rate cut could have a more significant impact on net interest margins (NIMs) than previous cuts.

Insurers

• RenaissanceRe's Acquisition of Platinum:
  • RenaissanceRe (unrated) decided to acquire Platinum (unrated), a rival reinsurer.
  • The transaction is credit negative due to potential increased leverage and risk exposure.

Sub-sovereigns

• Italy's Labour Market Reforms:

  • The reforms aim to reduce unemployment and increase the use of temporary workers.
  • This is credit positive for staffing industry players like Adecco (Baa2 stable) and ManpowerGroup (Baa3 positive).
  • The reforms could boost profit margins due to high operating leverage in the sector.
  • Temporary worker penetration in Italy is expected to rise from 0.9% to 1.6%.

• Croatia's Income Tax Cut:

  • Croatia reduced its income tax, which is credit negative for the city of Zagreb.
  • The tax cut may reduce local government revenue, affecting its ability to service debt.

• Mexico's Tamaulipas Pension Reform:

  • The pension reform in Tamaulipas, Mexico, is credit positive for the region.

Rating Changes

• Upgraded:

  • Seagate Technology
  • China CITIC Bank International
  • Danske Bank
  • Victoria Teachers Mutual Bank
  • Three classes of DBUBS 2011-LC1 CMBS

• Downgraded:

  • Scientific Games
  • Rede Energia
  • VAB Bank
  • Six classes of BACM 2008-LS1 CMBS

Research Highlights

• Reports were published on:
  • Euro area financial fragmentation
  • US healthcare
  • US chemicals
  • Singapore REITs
  • Chinese property developers
  • Global oil and gas
  • Global oilfield services and drilling
  • Global integrated oil & gas
  • Global independent exploration and production
  • Global beverages
  • Asian coal, steel, and power utilities
  • Global nuclear generation
  • German and UAE banks
  • Australian mortgage insurers
  • US life and P&C insurers
  • Global sovereigns
  • Asia Pacific credit
  • El Salvador, Senegal, Mozambique, Denmark, and Brazilian states
  • US housing finance agencies
  • Romanian covered bonds
  • Japanese ABS, RMBS, and CMBS

Key Themes

• Leverage and Liquidity: Several companies face credit risks due to increased leverage, reduced cash flow, or exposure to regulatory changes.
• Regulatory Impact: Tax reforms and legislative changes have both positive and negative implications on credit profiles.
• Profitability Pressures: Lower interest rate spreads and increased costs can reduce profitability, especially in the banking and energy sectors.
• Market Conditions: Improved market conditions in some regions (e.g., Greece) have led to credit positives, while others (e.g., Italy's staffing industry) show potential for growth due to structural reforms.