20160314-穆迪服务-Outlook_Credit_51页_1mb

Credit Outlook Summary

Core Content

This document provides an analysis of credit implications from various current events, focusing on corporate, infrastructure, and banking sectors. It outlines both credit positive and negative developments, including rating changes, company actions, and policy decisions that impact financial stability and risk profiles.

Main Points

Corporates

• Nuance Communications' Share Repurchase Agreement with Icahn:

  • Credit Implication: Credit negative.
  • Details: Nuance agreed to repurchase $500 million of its shares from Icahn Group at $19 per share, a 6% discount. The company will fund this with $375 million in cash and a $125 million promissory note.
  • Impact: Reduces liquidity, increases debt and interest expenses, and signals a shareholder-friendly strategy.
  • Outlook: Moody's revised the outlook to positive from stable due to improved profitability, but the repurchase is a negative credit event.

• SCMP's IPO and Debt Refinancing:

  • Credit Implication: Credit positive.
  • Details: SCMP (B3 positive), a subsidiary of KKR Retail Partners Midco, filed for an IPO in France. The IPO would raise €150-175 million and reduce net leverage from 3.0x to 2.0x.
  • Impact: Lower interest costs and improved free cash flow, which could positively affect its ratings.

• Toshiba Taps Canon as Potential Buyer for Toshiba Medical Systems:

  • Credit Implication: Credit positive for Toshiba, negative for Canon.
  • Details: Toshiba granted Canon exclusive rights to acquire TMSC, which could improve its liquidity. Canon, however, may need to take on significant debt to fund the purchase.
  • Impact: For Canon, the acquisition could dilute its operating margin and increase its asset risk.

Infrastructure

• Colombia's Energy Conservation Measures:
  • Credit Implication: Credit positive.
  • Details: Colombia introduced measures to reduce power demand by 5%, including monetary incentives for conservation. Spot power prices were capped at COP870 per kilowatt-hour, significantly above historical levels.
  • Impact: Reduces procurement costs for power generation companies and supports the electricity system's viability.

Banks

• Canadian Banks' Negative Equity Auto Loans:

  • Credit Implication: Credit negative.
  • Details: Increased negative equity in auto loans due to longer loan terms and low interest rates. This raises default risk and potential losses.
  • Impact: TD, BNS, and NBC have the largest exposure to non-residential secured loans, increasing their asset risk.

• Pemex's Reliance on Government Banks:

  • Credit Implication: Credit negative for lenders.
  • Details: Pemex is using government banks to finance supplier payments, increasing their exposure to the oil company.
  • Impact: The government's push for private-sector lending and Pemex's financial stress heighten the risk for these banks.

• Caixa's Mortgage Lending Stimulus in Brazil:

  • Credit Implication: Credit negative.
  • Details: Caixa introduced looser underwriting standards and extended credit for second homes, which increases asset quality risks.
  • Impact: Despite the stimulus, Caixa's NPL ratio rose to 3.6% in 2015, surpassing the system average. This could lead to higher credit costs and lower profitability.

• Romanian Strategic Default Legislation:

  • Credit Implication: Credit negative for banks.
  • Details: A proposed law allows strategic defaults on mortgages, reducing recovery rates and increasing default risk.
  • Impact: Banks may need to tighten underwriting standards, which could reduce mortgage demand and impair revenues.

• Japanese Banks' International Lending Growth:

  • Credit Implication: Credit negative.
  • Details: Japanese banks increased their international lending to $3.4 trillion in Q3 2015, surpassing UK banks.
  • Impact: This growth raises their risk profile and threatens asset quality, with megabanks like MUFG and SMFG showing significant increases in international loans.

Key Information

Rating Changes

• Downgraded: Banco de Bogota, Grupo Aval Acciones y Valores, Grupo Aval Limited, Standard Chartered Bank, Standard Chartered PLC, Standard Chartered Bank (Thai), Bahrain, and the Republic of the Congo.
• Upgraded: PPG Industries, StanCorp Financial Group, Swiss Re Corporate Solutions, 15 AmeriCredit ABS, two Mass Mutual equipment ABS, and 26 US subprime RMBS.

Research Highlights

• Reports cover topics such as US and Canadian corporate liquidity, global paper and forest products, chemical industry, retail, and stock exchanges.
• Analysis includes the impact of oil prices, mortgage lending, and structured finance instruments like CDOs and RMBS.

Recent Updates

• Nuance Communications: Share repurchase agreement with Icahn completed on 15 March 2016.
• Toshiba Medical Systems: Sale to Canon is ongoing, with the bid around ¥700 billion.
• Colombia's Energy Crisis: Caused by El Niño, leading to higher spot power prices and supply shortages.
• Pemex's Payment Plan: Using government banks to settle supplier debts, increasing their exposure.
• Caixa's Loan Growth: Projected to grow by 7-11% in 2016, with NPL ratio rising to 3.6%.
• Romanian Legislation: Proposed strategic default law could increase mortgage defaults and lower recovery rates.
• Japanese Banks: International lending growth raises their risk profile and asset quality concerns.

Conclusion

The document highlights a mix of credit positive and negative events across corporate, infrastructure, and banking sectors. While some companies and institutions benefit from improved liquidity and reduced leverage, others face heightened risks due to increased debt exposure, poor asset quality, and regulatory changes. These developments have significant implications for credit ratings and financial stability.