20170227-穆迪服务-NEWS___ANALYSIS_48页_1mb

Credit Outlook Summary

Core Content

This document provides an overview of credit implications from recent corporate and market events, focusing on how these developments affect financial stability, leverage, liquidity, and rating outlooks for various entities. The analysis is divided into sections such as Corporates, Infrastructure, Banks, Financial Market Infrastructure, Sovereigns, Sub-sovereigns, and US Public Finance.

Main Points

Corporates

• Restaurant Brands' Acquisition of Popeyes

  • RBI acquired Popeyes for $1.8 billion, funded by $1.3 billion in new debt and $600 million in cash.
  • Moody's adjusted pro forma leverage is expected to rise to 5.5x from 5.0x at year-end 2016.
  • Rating outlook for 1011778 B.C. was changed to stable from positive due to increased leverage.
  • However, the B1 corporate family rating was affirmed due to improved earnings, amortization, and diversification benefits.
  • Potential rating upgrades depend on debt/EBITDA decreasing to 4.5x and EBITA coverage of interest increasing to 3.0x.
  • Downgrades could occur if leverage exceeds 5.5x or EBITA to interest drops below 2.0x, or liquidity deteriorates.

• SourceHOV's Reverse IPO Merger with Novitex and Quinpario

  • The merger is credit positive, reducing leverage and enhancing liquidity.
  • The new entity, Exela Technologies, will have a pro forma debt/EBITDA of ~5.4x, down from SourceHOV's 6.3x.
  • The merger is expected to be funded with $1.35 billion in new debt and cash from Quinpario.
  • This transaction will allow SourceHOV and Novitex to refinance existing debt and potentially withdraw their ratings.
  • Novitex adds scale and cross-selling opportunities, while Quinpario provides equity support.

• Alibaba's Strategic Partnership with Bailian

  • The partnership strengthens Alibaba's offline retail presence without increasing leverage or capital spending.
  • It allows access to Bailian's customer and merchant data, enhancing multi-channel retailing.
  • No negative impact on leverage is expected, and the adjusted debt/EBITDA ratio remains low.
  • The partnership supports healthy growth in the Chinese equity market by encouraging value investing.

• Popeyes Acquisition Impact on RBI

  • The acquisition is expected to be small (~0.9% of total assets) and not significantly affect leverage.
  • However, if the leverage reduction is delayed, it may negatively impact credit quality.
  • The stable outlook assumes leverage falls below 1.8x by December 2017.

• Boston Scientific's Recall of Lotus Valve

  • A voluntary recall of TAVR products is credit negative due to potential delays in FDA approval and reduced sales growth.
  • Lotus sales are not yet material to 2017 financial results, but the recall could affect future growth.
  • The company expects FDA approval in mid-2018 instead of early 2018.
  • TAVR technology offers strong growth potential, but the recall may limit this opportunity.

• Votorantim's Steel Deal with ArcelorMittal

  • The non-cash agreement removes BRL850 million in gross debt from Votorantim's balance sheet.
  • The deal does not affect ArcelorMittal's credit profile.
  • Votorantim's adjusted debt/EBITDA ratio is expected to drop to 3.3x from 3.4x.
  • The Brazilian operations of Votorantim Siderurgia S.A. will become a subsidiary of AMB.

Banks

• Brazilian Mortgage Lending Incentive

  • A new measure to stimulate mortgage lending is credit positive for banks.
  • It could improve credit quality and support financial stability.

• Royal Bank of Scotland's Non-Divestment of Williams & Glyn

  • The decision not to divest is credit positive for the bank.
  • It reduces regulatory and operational risks.

• German Real Estate Market Risks

  • Overvaluation in Germany's real estate market poses risks for banks and RMBS.
  • However, reforms to the Deposit Protection Fund are credit positive, improving bank viability.

• BPCE's Branch Network Reduction

  • The reduction is credit positive, improving efficiency and financial performance.

• Raiffeisen Schweiz's Mortgage Lending

  • Despite growth in mortgage lending, shrinking margins are credit negative.

• Sweden's MREL Framework

  • The framework is credit positive, enhancing bank resilience.

Financial Market Infrastructure

• UK's Supervision Proposals
  • Enhanced supervision of financial market infrastructure companies is credit positive.
  • It improves regulatory oversight and financial stability.

Sovereigns

• Hong Kong's Budget

  • The budget balances economic support with fiscal prudence, a credit positive development.

• Korea's Household Debt

  • Rising household debt poses downside risks to economic growth, which is credit negative.

Sub-sovereigns

• German Laender's Salary Pact

  • The salary agreement with public employees is credit positive, improving public sector finances.

• Australian Universities

  • Growing international student enrollments are credit positive for Australian universities.

US Public Finance

• Kansas Governor's Tax Hike Veto
  • The veto of a tax hike is credit negative, potentially affecting state finances.

Key Information

• The document highlights the credit implications of various business and policy decisions, with a focus on leverage, liquidity, and rating outlooks.
• It discusses both positive and negative credit impacts across different sectors and regions.
• The analysis includes specific examples such as acquisitions, recalls, regulatory changes, and financial restructuring.
• Rating affirmations and potential upgrades/downgrades are based on financial metrics like debt/EBITDA and EBITA coverage of interest.
• The document also includes exhibits and tables for visual representation of financial data and historical acquisitions.