20170804-穆迪服务-Credit_Outlook_27页_820kb

Credit Outlook Summary

Core Content Overview

This document provides an analysis of the credit implications of recent corporate and infrastructure events. It highlights both credit negative and credit positive developments affecting various companies and sectors. The analysis is conducted by Moody's Analytics, with insights from multiple credit officers and analysts across different industries.

Main Points and Key Information

Corporates

• Discovery Communications

  • Acquired Scripps Networks for $14.6 billion, funded by 30% equity and 70% cash, with the latter financed by new debt.
  • This increases Discovery's pro forma leverage ratio to 4.9x, which is above its 4x quantitative guidance.
  • Despite expected leverage reduction to 3.3x by end of 2019, the transaction is considered credit negative due to the high leverage.
  • The acquisition enhances Discovery's scale, margin improvement, and international reach, but poses risks due to the shift in content distribution and potential costs from channel rationalization.

• LabCorp

  • Acquired Chiltern for $1.2 billion, which is credit negative due to increased leverage.
  • Pro forma debt/EBITDA ratio is expected to rise to 3.7x by 30 June 2017.
  • The acquisition is expected to strengthen LabCorp's position in the contract research organization (CRO) sector and improve its financial profile over time.
  • Integration risks are low due to minimal customer overlap and Chiltern's smaller size.

• Starbucks

  • Revised earnings outlook for 2017, leading to a credit negative rating.
  • Closes all Teavana stores and acquires full ownership of Starbucks East China business.
  • The China acquisition is credit positive, adding $1.0 billion in revenue in the first year and expected to be breakeven to slightly accretive.
  • The company is expected to maintain strong earnings, cash flow, and liquidity despite the revised guidance.

• US Tobacco Companies

  • The FDA's plan to reduce nicotine in cigarettes is credit negative.
  • This could accelerate the decline in cigarette sales and reduce the attractiveness of the product.
  • E-cigarettes may benefit from the regulatory delay, but the impact on traditional cigarette sales is expected to be significant.
  • The plan does not resolve the uncertainty around excise taxes for "deemed tobacco products."

• Ceconomy

  • Acquired a 24.33% stake in FNAC DARTY for €452 million, considered credit positive.
  • This gives Ceconomy a strategic foothold in the French consumer electronics market.
  • The transaction may lead to further stake increases, but any such move would likely occur after 12-18 months.
  • The deal is expected to increase Ceconomy's gross debt/EBITDA ratio, but the company remains in a strong financial position.

• Wm Morrison

  • Entered into a wholesale supply agreement with McColl's, considered credit positive.
  • The agreement is expected to boost annualized wholesale sales to over £700 million by 2018.
  • It supports Morrisons' strategy to exit the convenience store business and leverages its existing manufacturing capabilities.
  • The agreement also strengthens Morrisons' negotiating position with third-party suppliers.

• CIFI Holdings

  • Proposed share issues with Ping An Life Insurance, considered credit positive.
  • The new equity funding is expected to support property development and reduce debt growth.
  • Debt leverage is projected to improve to 80%-90% over 12-18 months.
  • Ping An will gain a 9.94% stake in CIFI and appoint a non-executive director to its board.

• Noble Group

  • Announced a significant loss of $250 million or more in Q2 2017, a credit negative.
  • The loss reflects a loss of confidence among market participants, including lenders.
  • The company faces liquidity risk and has to manage its operations conservatively.
  • Plans to sell key assets to reduce debt, but the impact on its scale and global reach is uncertain.

Infrastructure

• West Coast Ports
  • The early extension of the ILWU contract through 1 July 2022 is credit positive.
  • This resolves the risk of labor disruptions and helps retain market share.
  • The extension is timely given the increased efficiency and lower costs of transport to Gulf and East Coast ports.
  • Labor stability is expected to support supply chain reliability for US importers and exporters.

Summary of Credit Implications

Conclusion

The document outlines a range of credit implications across different sectors. While some acquisitions and strategic moves are viewed as credit positive due to their potential to enhance market position and financial stability, others are credit negative due to increased leverage, declining sales, and operational risks. The overall analysis emphasizes the importance of financial management, market trends, and regulatory changes in shaping credit profiles.