20170807-穆迪服务-Credit_Outlook_33页_1mb

Credit Outlook Summary

Core Content

The document provides an analysis of credit implications stemming from recent events in corporate, infrastructure, bank, and sovereign sectors. It highlights both credit positive and credit negative developments, offering insights into how these events affect financial health and credit ratings.

Main Views

Corporates

• Aptos' Acquisition of TXT Retail: The planned acquisition is credit negative due to increased debt and leverage. Pro forma debt/EBITDA will rise to 7.1x from 6.3x, and interest coverage will fall to 1.7x from 2.1x. However, the company is expected to maintain adequate liquidity and reduce leverage to 6.0x over 12-18 months through synergies and cost savings.
• CommScope's Share Buybacks: The company's share buybacks while experiencing earnings decline will delay deleveraging. We expect its Moody's-adjusted debt/EBITDA to rise to over 4.5x by the end of 2017, versus a prior forecast of declining to 3.7x. Deleveraging is expected to be delayed unless end markets recover significantly in 2018.
• Symantec's Acquisitions and Divestiture: The sale of the web security business and recent acquisitions are credit negative due to reduced EBITDA and free cash flow, and delayed deleveraging. While the company has made progress in repaying debt from previous acquisitions, the recent transactions will slow down its debt reduction progress.

Infrastructure

• South Carolina Nuclear Plant Termination: The decision to terminate the construction of the VC Summer Nuclear Units 2 and 3 is a credit positive as it eliminates material construction risk and reduces financial strain. However, it shifts risk to regulatory and political factors, which could affect cost recovery.
• Natural Gas Pipelines: The restoration of FERC quorum allows $14 billion of natural gas pipeline projects to proceed, which is credit positive for companies like TransCanada, Enbridge, and Dominion. Delays in obtaining FERC approval have increased project costs and pushed back in-service dates.
• Alto Maipo Construction Challenges: The technical default and construction delays at the Alto Maipo hydroelectric project are credit negative for AES Gener and AES. The project's completion date and fund availability are uncertain, and further cost overruns could lead to equity impairment for AES Gener.

Banks

• US Banks' Special Mention and Classified SNCs: Elevated levels of special mention and classified shared national credits are credit negative, particularly due to leveraged loans. These loans make up 41% of SNC commitments and are vulnerable to economic downturns and rising interest rates.
• Czech Central Bank Rate Hike: The 20 basis point increase in the benchmark rate is credit positive for Czech banks, helping to reverse declining net interest margins and improve profitability. However, midsize banks may face higher funding costs due to their reliance on corporate deposits.
• Poland's Mortgage Relief Fund: The proposed fund to assist foreign-currency mortgage borrowers is credit negative for Polish banks as it would reduce profitability. The annual cost is estimated at PLN3.2 billion, or 20% of banks' 2017 pre-tax earnings. It could also reduce credit losses from foreign-currency mortgages.

Key Information

• Credit Positive Events:

  • South Carolina electric utilities terminating nuclear plant construction.
  • FERC quorum restoration enabling natural gas pipeline projects.
  • Cypriot banks benefiting from increased loan demand.
  • Czech Central Bank raising benchmark rate.

• Credit Negative Events:

  • Aptos' acquisition of TXT Retail increasing debt and leverage.
  • CommScope's share buybacks delaying deleveraging.
  • Symantec's acquisitions and divestiture reducing EBITDA and delaying deleveraging.
  • Alto Maipo's construction challenges impacting AES Gener and AES.
  • Poland's proposed mortgage relief fund reducing bank profits.
  • Connecticut budget impasse as a credit negative for local governments.

Structure

Corporates

• Aptos: Credit negative due to increased debt and leverage.
• CommScope: Credit negative due to delayed deleveraging.
• Symantec: Credit negative due to reduced EBITDA and free cash flow.

Infrastructure

• South Carolina: Credit positive from project termination.
• Natural Gas Pipelines: Credit positive with FERC quorum restored.
• Alto Maipo: Credit negative due to construction delays and technical default.

Banks

• US Banks: Credit negative due to high SNC levels and leveraged loans.
• Czech Banks: Credit positive from rate increase.
• Polish Banks: Credit negative from proposed mortgage relief fund.

Sovereigns

• Mexico: Credit positive due to strengthened economy from NAFTA clarity.
• Costa Rica: Credit negative due to ongoing fiscal deterioration.
• Russia: Credit negative due to expanded US sanctions.
• Papua New Guinea: Credit positive due to continued investment appeal.

Sub-sovereigns

• US Public Finance: Credit negative from Connecticut budget impasse.
• Mexican States: Credit positive from increased federal transfers.

Exhibits

• Exhibit 1: Shows the decline in Czech banks' net interest margins and return on assets.
• Exhibit 2: Illustrates the growth of mortgage loans and the impact of the benchmark rate on Czech banks' assets.

Additional Notes

• The document does not announce any credit rating actions, but provides updated information on existing ratings.
• The Weekly Market Outlook is mentioned as a sister publication for financial predictions and market activity.