20170605-穆迪服务-Credit_Outlook__Credit_Implications_of_Current_Events_33页_670kb

Credit Outlook Summary - June 5, 2017

Core Content

This document provides an analysis of the credit implications of various corporate, banking, exchange, insurance, and sovereign events. It outlines the credit impacts of mergers, acquisitions, regulatory changes, and financial restructuring, focusing on how these events affect credit ratings and financial health.

Main Points

Corporates

• Praxair and Linde's Merger: A $70 billion all-stock merger is credit positive for both companies due to expected cost savings and reduced leverage. The combined company is expected to have a retained cash flow (RCF)/debt ratio above 25% and an adjusted debt/EBITDA ratio below 2.5x within 18-24 months post-merger. However, integration risks may limit credit quality improvements.
• First Data's Acquisition of CardConnect: This $750 million cash acquisition is credit negative as it increases leverage and the purchase price is a high EBITDA multiple. First Data's net debt/EBITDA ratio is expected to decrease from 6.4x to 4.0x by the end of 2019.
• Worthington's Acquisition of Amtrol: A $283 million acquisition that is credit positive, enhancing scale, diversity, and cash flow. It is expected to reduce leverage to 1.5x and improve interest coverage to 10.5x. The acquisition may also boost free cash flow and allow for liquidity rebuilding.
• Tatneft's Investment in AK BARS: The acquisition of 5 billion shares of AK BARS at RUB5 billion increases Tatneft's exposure to the banking sector, which is credit negative. This may lead to cash injections into the bank, which could negatively impact Tatneft's core oil and gas operations.
• Formosa's Steel Operations in Vietnam: The start of operations at the steel plant is credit positive. The company is expected to generate meaningful revenue, with adjusted debt/EBITDA ratios revised down to 3.0x-3.3x. The plant may operate at an operating loss in 2017 but is expected to improve over the next few years.
• Tianjin Binhai New Area Construction's Consent Solicitation: The proposed amendment to bond terms is credit positive for bondholders due to the stronger guarantee provided by TBCI, despite the loss of some covenants. A successful solicitation could lead to an upgrade in the senior unsecured rating from Baa2 to Baa1.

Banks

• Banco Comafi's Acquisition of Deutsche Bank's Argentine Subsidiary: Credit positive for Comafi, enhancing profitability and revenue diversification. Deutsche Argentina's rating is downgraded to B3 due to the loss of parent support.
• Banco Macro's Equity Sale: A credit positive move as it allows Banco Macro to partially offset a potential decline in capital ratios if it acquires Banco Patagonia. The sale also reflects improved access to global capital markets for Argentine banks.
• Barclays' Sale of Stake in Barclays Africa Group Limited (BAGL): A credit positive action as it reduces exposure to weaker African markets and supports Barclays' restructuring plan. The sale also improves the CET1 ratio by around 73 basis points.

Exchanges

• LSEG's Acquisition of Citigroup's Fixed-Income Index Business: This increases leverage, which is a negative credit impact.

Insurers

• Japan's Industry-Wide Premium Rate Reduction: This is credit negative for P&C insurers as it reduces profitability.

Sovereigns

• Bahamas' Deficit: A larger-than-expected deficit weakens the fiscal position, which is credit negative.
• Oman's Weak Fiscal Performance: Despite oil-price recovery, the weak fiscal performance is credit negative.
• Philippines' Tax Reform: The passage of tax reform is credit positive.

Key Information

• Mergers and Acquisitions: Several M&A activities are highlighted, with some being credit positive and others credit negative based on their financial implications.
• Leverage and Capital Structure: Changes in leverage and capital structure are central to the credit analysis, with specific metrics such as RCF/debt ratio and debt/EBITDA ratio being monitored.
• Regulatory and Market Changes: Regulatory changes, such as the stricter mortgage amortisation requirement in Sweden, are noted as credit positive for banks.
• Economic and Industry Trends: The document references economic indicators like the Nigerian Purchasing Managers Index and steel price trends, which influence credit outlooks.
• Credit Ratings and Qualitative Assessments: The document emphasizes that it does not announce credit rating actions, but provides qualitative assessments of credit implications.

Summary

The credit outlook analysis covers a range of corporate and banking activities, highlighting their potential impact on credit quality. Mergers like Praxair and Linde are seen as credit positive due to synergies and cost savings, while acquisitions like First Data's purchase of CardConnect are credit negative due to increased leverage. The document also discusses the implications of regulatory changes, capital restructuring, and economic trends on credit profiles, emphasizing the importance of leverage, capital ratios, and cash flow generation in determining credit quality.