20160114-穆迪服务-Credit_Outlook_13页_1mb

Credit Outlook Summary

Core Content

This document provides a detailed analysis of credit implications from recent corporate, insurer, and accounting developments. It outlines how specific financial actions—such as acquisitions, spinoffs, share repurchases, and changes in accounting standards—impact the credit profiles of various companies. The analysis is conducted by Moody's Analytics, highlighting both positive and negative credit outcomes based on leverage, liquidity, and operational risks.

Main Points and Key Information

Corporates

• Charles River's Acquisition of WIL Research

  • Credit Impact: Credit negative
  • Reasons: The acquisition will increase leverage (from 2.9x to 4.0x) and reduce liquidity due to increased debt and reduced revolver availability.
  • Outlook Change: Moody's changed Charles River's outlook to stable from positive and reduced its SGL rating to SGL-2.
  • Strategic Benefits: Enhances scale, geographic footprint, and customer diversity, particularly in the DSA (Discovery and Safety Assessment) segment.
  • Future Outlook: Leverage is expected to decline to 3.5x within 12-18 months due to EBITDA growth and debt repayment.

• Clear Channel Outdoor's Sale of Advertising Assets

  • Credit Impact: Credit negative
  • Reasons: The sale increases leverage to 8x from 7.6x, and the proceeds are expected to benefit iHeartCommunications rather than reducing debt at CCOH.
  • Liquidity Impact: iHeart's leverage is expected to rise to 12.1x, increasing the risk of payment or maturity default.
  • Market Context: The auction market is expected to face a cyclical downturn over the next 12-18 months.

• SUPERCALU's Spinoff of Save-A-Lot

  • Credit Impact: Credit negative
  • Reasons: The spinoff reduces the growth potential of Supervalu and increases leverage due to loss of EBITDA from the Save-A-Lot segment.
  • Financial Impact: Debt/EBITDA is expected to rise to 5.0x from 4.3x.
  • Post-Spinoff Outlook: Supervalu's retail segment will face margin pressure due to sluggish consumer demand and limited ability to pass on price increases.

• American Renal's Debt Paydown via IPO

  • Credit Impact: Credit positive
  • Reasons: Proceeds from the IPO will be used to pay down debt, improving adjusted debt/EBITDA to around 5.0x from 6.2x.
  • Outlook: The IPO is positive for the company's credit profile, though may lead to lower instrument ratings for first-lien creditors.
  • Company Profile: Provides outpatient dialysis services across 24 states and the District of Columbia.

• IHS' Acquisitions of OPIS and CARPROOF

  • Credit Impact: Credit negative
  • Reasons: Both acquisitions are primarily debt-financed, increasing leverage and reducing liquidity.
  • Debt/EBITDA: Expected to rise to 4.7x (adjusted) or 3.9x (reported).
  • Future Outlook: IHS plans to reduce leverage through free cash flow and divestitures, with a target of below 4x by 2017.

• CGG's Equity Raise

  • Credit Impact: Credit positive
  • Reasons: The raise will fund transformation costs and strengthen balance sheet and liquidity.
  • Liquidity Measures: Includes a minimum liquidity covenant of $175 million under French and US revolving credit facilities.
  • Debt Maturity Extension: French revolving credit facility maturity extended to June 2018, reducing refinancing risk.
  • Industry Context: The oil and gas seismic industry remains stressed due to low exploration activity and oil prices.

Insurers

• US Health Insurers and ACA Enrollment Period Changes
  • Credit Impact: Credit positive
  • Reasons: Tightening and clarifying the special enrollment period (SEP) rules is expected to reduce the number of ineligible enrollees, stabilizing healthcare costs.
  • Current SEP Utilization: Insurers report that 25-33% of marketplace customers come through SEPs, with higher utilization of services.
  • Concerns: Lack of documentation leads to potential abuse, prompting recommendations for verification.
  • Uncertainty: It is unclear if the administration will implement stricter verification processes.

Accounting

• Operating Lease Reporting Changes (IFRS 16)
  • Impact: Increases reported debt and makes balance sheets more reflective of true financial obligations.
  • Change Effective: 2019 financial statements.
  • Methodology: Moody's adjusts reported amounts by adding lease debt and an asset to the balance sheet, using present value of lease commitments.
  • Comparison with IFRS 16: While similar, differences exist in expense recognition and cash flow reporting.
  • Total Adjustment: Adds $1.7 trillion in debt to Moody's global non-financial rated universe.

Summary of Credit Outcomes

Conclusion

The document outlines a range of credit implications for companies across different sectors, emphasizing the balance between strategic growth and financial risk. Acquisitions and spinoffs are generally viewed negatively due to increased leverage and reduced liquidity, while debt reduction and equity raises are credit positive. Changes in accounting standards, such as IFRS 16, are expected to make balance sheets more transparent and useful for credit analysis. The overall sentiment reflects the importance of financial discipline and the impact of macroeconomic and industry-specific factors on corporate credit profiles.