201801券商二credit implications of current events

1、15 JANUARY 2018NEWS & ANALYSISSovereigns US ends Salvadorians Temporary Protected Status, a risk for El Salvadors economy16Corporates For HP, preliminary personal computer sales data bodes well Sears pares its unencumbered asset base to boost liquidity as sales slow, a credit negative The Navigators

2、 exit from the pellets business is credit positive2Brazil unlikely to live by its Golden Rule as fiscal pressures mount, a credit negativeVietnams anti-graft efforts underscore ongoing focus on strengthening competitivenessInfrastructure Connecticut Light and Power Companys proposed rate-case settle

3、ment is credit positive6US Public Finance19California court ruling adds to stringent judicial views of pension reformsBanks Argentina allows banks to issue inflation-adjusted securitization vehicles, a credit positive7Securitization UKs Open Banking initiative is credit positive for consumer securit

4、isations21Removal of conflicting interests in Uzbekistans central bank will improve banking supervisionUnion Banks capital raise will restore buffersRECENTLY IN CREDIT OUTLOOKArticles in Last Thursdays Credit OutlookGo to Last Thursdays Credit Outlook23Insurers13Molina Healthcares loss of New Mexico

5、 Medicaid contract is credit negative Taiwans higher foreign-exchange reserve requirement will help reduce insurers currency riskMOODYS.COMThe next issue of Credit Outlook will be Monday 22 JanuaryNEWS & ANALYSISCredit implications of current eventsCorporatesFor HP, preliminary personal computer sal

6、es data bodes wellLast Thursday, International Data Corporation reported that HP Inc. (Baa2 stable) had retained the leading position in worldwide personal computer (PC) sales, with a 23.5% market share in fourth-quarter 2017, buoyed by strong business PC demand, led by Windows 10 upgrades, and an i

7、mprovement across most geographic regions, especially Asia-Pacific. Sales in the US PC market (about 23% of worldwide demand) were down by mid-single digits, although HP grew units there. Among the top five PC venders, HP and Apple Inc. (Aa1 stable) were the only ones to manage more than a 1% unit s

8、hipment increase, with year- over-year growth of 8.3% for HP and 7.3% for Apple.Richard J. LaneSenior Vice President+1.212.553.7863We expect that HP will maintain a very strong position in the PC market, driven by strong execution and solid product offerings across the commerci

9、al and consumer segments. PC unit market share has grown for the past seven consecutive quarters to a worldwide lead and company record of 23.5%. For full-year 2017, HP increased PC unit shipments by 8.3%, compared with a decline of 1.0% for second-place Lenovo, 2.7% growth for third-place Dell Inc.

10、 (Ba1 stable) and a 0.5% decline for the overall PC market.Amid a stabilizing but still soft overall PC market, HP, Lenovo and Dell have a combined record 61.4% unit market share (up from 59.9% a year ago) and we expect that they will continue to take share as smaller competitors that lack scale rec

11、ede (see Exhibit 1).EXHIBIT 1Top three personal computer manufacturers continue to gain market shareTotal unit sales for previous 12 months and quarterly unit market shareUnit sales for previous 12 monthsHPLenovoDell40024%22%20%18%16%14%12%10%8%6%4%2%0%350300250200150100500Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

12、 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1Q2 Q3 Q410 11 11 11 11 12 12 12 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17 17 17Source: International Data CorporationWe project that HPs PC revenue will grow for the seventh consecutive quarter in the period ending January 2018, incre

13、asing 5%-10% based on unit growth and average selling price increases, in part owing to premium mix shift and effective market segmentation. Despite a still-challenging environment for component pricing, we believe PC makers have been able to pass along more of the higher costs to buyers as compared

14、 with earlier in 2017.This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history.2MOODYS CREDIT OUTLO

15、OK15 JANUARY 2018MillionsNEWS & ANALYSISCredit implications of current eventsFor HP, improved mix (more higher-margin notebooks and commercial business) and successful supply- chain efforts will lead to slightly higher operating profitability and stronger margins. We forecast revenue of$8.8 billion

16、and operating profit of $330 million for HPs PC segment in the first quarter, with operating margins approximating 3.9% (see Exhibit 2). Over the next year, we believe that PC revenue growth will depend on continued share gains aided by higher-end mix shift. Operating profit margins will remain in t

17、he 3%-4% range after considering competitive market pricing, periodic component shortages whose costs are difficult to pass through to consumers, and the challenges to consistently manage its supply chain.EXHIBIT 2HPs PC segments revenue growth and margin stabilityRevenueOperating margin$10$9$8$7$6$

18、5$4$3$2$1$05.0%4.5%4.0%3.5%3.0%2.5%2.0%1.5%1.0%0.5%0.0%Sources: Company reports and Moodys Investors Service estimates3MOODYS CREDIT OUTLOOK15 JANUARY 2018$ BillionsNEWS & ANALYSISCredit implications of current eventsSears pares its unencumbered asset base to boost liquidity as sales slow, a credit

19、negativeLast Wednesday, Sears Holdings Corporation (Caa3 negative) said that it is raising additional financing and negotiating more favorable terms on more than $1 billion in upcoming debt maturities, which could result in a distressed exchange. The action is credit negative because the companys un

20、encumbered asset base continues to diminish and its operations underperformed competitors in the 2017 holiday season.Christina BoniVice President - Senior Analyst+1.212.553.0514The plan to secure additional financing and negotiate more favorable debt terms follows a 16%-17% d

21、ecline in comparable store sales for the holiday season, a sharp contrast to the positive results of many major department stores in November and December. Nonetheless, losses stabilized, with Sears estimating EBITDA at between negative $70 million and negative $10 million relative to negative $61 m

22、illion forfourth-quarter 2017.In addition, the company raised another $100 million in a new term loan secured by ground leases and intellectual property and has the option to raise an additional $200 million against the pledged collateral. The company also has identified another $200 million in cost

23、 savings to pursue this year on top of the $1.25 billion in expense reductions realized this fiscal year. The additional liquidity and cost saving are necessary because Sears continues to generate negative operating cash flow, which we estimate will exceed $1.8 billion this year.Sears also amended $

24、303 million second-lien notes due on 15 October 2018 by increasing the advance rate for inventory to 75% from 65% and deferred the collateral coverage test, which will restart in the second quarter of this year. The actions help avoid triggering a covenant that would require Sears to offer to repurc

25、hase the notes at 101% of principal.Sears negative rating outlook reflects our view that its business will continue to suffer considerable operating losses that will need to be funded. Although the company has alternative assets to enhance its liquidity, a more comprehensive refinancing will be requ

26、ired this year to avoid a bankruptcy filing.4MOODYS CREDIT OUTLOOK15 JANUARY 2018NEWS & ANALYSISCredit implications of current eventsThe Navigators exit from the pellets business is credit positiveLast Monday, The Navigator Company (Ba2 stable) announced that it had expected to receive $135 million

27、for the sale of its pellets business to a joint venture managed and operated by an affiliate of Enviva Holdings. The sale, which The Navigator and Enviva agreed late last year, will free up capital that the company can reinvest in its pulp and tissue operations, which we think have more robust under

28、lying demand and where the company has stronger competitive advantages. The agreed price also will fully recover the amount initially invested into the business.Martin FujerikVice President - Senior Analyst+49.69.70730.909Entering the pellets business was an opportunistic inv

29、estment in line with The Navigators strategy to diversify its operations beyond uncoated woodfree paper, which is experiencing a structural decline. The company invested roughly $120 million in a state-of-art wood pellet plant in the US state of South Carolina, with an annual capacity of 500,000 ton

30、nes. The plant began production in fourth-quarter 2016 and the first pellets were sold in the first half of 2017.As of end of the third-quarter 2017, the project has not yet reached breakeven EBITDA, although that trend is improving, and reported only 12 million of sales for the nine months to Septe

31、mber 2017, equal to around 1% of the groups turnover. Even though the sale will positively affect The Navigators EBITDA margin, the improvement will not be material for the company because the project has not yet reached its full potential and is still margin dilutive.We do not think that the exit f

32、rom the pellets business marks a change in the companys strategic direction. We expect that The Navigator will continue to invest well above its maintenance capex needs of 30-40 million annually to diversify beyond paper. Additionally, although the final allocation of the proceeds has not been deter

33、mined yet, we expect that the company will use the funds to facilitate the diversification strategy, while keeping net reported leverage below 2.0x (it was 1.9x for the last 12 months toSeptember 2017).We expect that The Navigator will focus on further strengthening its pulp and tissue operations. T

34、he company plans to invest 380 million during 2017-19, which includes expansions of 120 million in tissue and 85 million in pulp expansion, and furthering its forest plantation project in Mozambique, with an investment pace of 10 million annually.The tissue expansion relates to a new tissue mill in

35、Cacia, Portugal, with an expected annual capacity of roughly 70,000 tonnes. The new mill, together with the current capacity in Vila Velha de Rodao, Portugal, of around 60,000 tonnes per year, would already make The Navigator one of the leading tissue producers in Iberia, with a backward integration

36、 into pulp, an important competitive advantage, and profitability above the market average. The key project on the pulp side includes an increase of pulp capacity at its Figuera de Foz mill in Portugal by roughly 70,000 tonnes per year.5MOODYS CREDIT OUTLOOK15 JANUARY 2018NEWS & ANALYSISCredit impli

37、cations of current eventsInfrastructureConnecticut Light and Power Companys proposed rate-case settlement is credit positiveLast Thursday, Connecticut Light and Power Company (CL&P, Baa1 stable) announced that it had reached a settlement with key interested parties, including the prosecutorial staff

38、 of Connecticuts Public Utilities Regulatory Authority (PURA) and the Office of Consumer Counsel on the rate case it filed with the PURA on 22 November 2017. Although the settlement still requires approval by state regulators, the utilitys agreement with these key parties of the main terms is a sign

39、ificant and credit-positive step toward a final rate-case decision.Jeffrey CassellaVice President - Senior Analyst+1.212.553.1665Rate-case settlements usually result in a rate-case decision more quickly than typically lengthy fully litigated rate cases. The settlement benef

40、its CL&Ps earnings and cash flow by reducing regulatory lag, the interval between a utilitys costs and investments and their recovery from customers through an increase in rates.We expect the PURAs approval in May.The settlement includes a $154.5 million phased-in base electric distribution revenue

41、increase, including a$97.1 million increase on 1 May 2018, $32.7 million in May 2019 and $24.7 million in May 2020. The phased-in rate increase seeks to mitigate some of the immediate rate effect on customers. Although the agreement is less than half of CL&Ps request of $336.9 million, the agreed re

42、venue increase is partially affected by lower revenue collected from customers for the purpose of tax expense compensation owing to the recent change in the corporate federal tax rate. Further revenue reductions could occur as the utility continues its analysis on the effect of the lower corporate f

43、ederal tax rate.The agreement includes a return on equity (ROE) of 9.25% and equity ratio of 53%. Although the ROE is lower than the national average of around 9.7%, it is higher than CL&Ps ROE of 9.17% allowed in its previous 2014 rate-case decision. The utility must share 50% of any earnings above

44、 the 9.25% ROE with its customers. Additionally, CL&P will be able to earn a return on a higher equity ratio compared with the 50.38% allowed in its last rate case.The settlement allows CL&P to continue to use a revenue decoupling mechanism that was adopted in its last rate case. Revenue decoupling

45、is credit positive because it adds to the predictability and stability of revenue and cash flow generation. CL&Ps decoupling mechanism reconciles the amounts recovered from customers, on an annual basis, with the distribution revenue requirement to be set by the PURA. The settlement also includes a

46、core capital tracker that will allow for timely recovery of the utilitys capital investments for core capital projects of up to $270 million for calendar years 2018-20 and up to $300 million for each year after 2020 until its next rate-case proceeding.For the 12 months that ended 30 September 2017,

47、CL&Ps ratio of cash flow from operations pre-working capital changes to debt was 22.4%. We expect CL&Ps financial metrics to remain stable, including a ratio of cash flow from operations pre-working-capital changes to debt in the 20% range over the next few years.Berlin, Connecticut-based CL&P is a

48、regulated electric transmission and distribution utility providing electric service to about 1.2 million customers and is the second-largest subsidiary of Eversource Energy(Baa1 stable).6MOODYS CREDIT OUTLOOK15 JANUARY 2018NEWS & ANALYSISCredit implications of current eventsBanksArgentina allows ban

49、ks to issue inflation-adjusted securitization vehicles, a credit positiveLast Monday, Argentinas Comisin Nacional de Valores (CNV), the countrys securities market regulator, published a resolution that gives Argentine banks the ability to securitize their inflation-adjusted loan portfolios mainly co

50、mposed of mortgages denominated in unidad de valor adquisitivo. The resolution is credit positive for banks because it will help them address the maturity and currency mismatch they face as they fund mostly with short-term non inflation-adjusted liabilities long-term inflation-adjusted loans with ma

51、turities of up to 30 years. This will ease a significant constraint on banks ability to conduct mortgage lending, which remains underdeveloped in Argentina.Florencia CalventeAssociate Analyst+54.11.5129.2639Marcelo De GruttolaAssistant Vice President Analyst+54.11.5129.26

52、24Total mortgages constitute less than 1% of GDP in Argentina, much lower than regional peers (see exhibit). Market penetration remains limited because a high inflation rate and banks lack of access to stable long- term funding have restricted their capacity to originate

53、long-term loans. Inflation-linked mortgages, most of which were issued in 2017, account for around 45% of total outstanding mortgages and more than 90% of newly issued mortgage loans (based on November 2017 figures). Although inflation indexation is meant to address the constraint on the demand for

54、mortgages caused by the countrys high inflation, and we expect demand for these loans to continue rising, banks do not currently have access to a sufficient supply of appropriate funding to finance this demand.Comparison of Latin American countries gross mortgage loans as a percent of GDP26%24%22%20

55、%18%16%14%12%10%8%6%4%2%0%ArgentinaPeruMexicoChileBrazilMortgage lending data for Peru, Mexico, Brazil and Chile are as of November 2017. Data for Argentina as of August 2017. GDP data based on Moodys 2017 forecast.Source: Moodys Investors ServiceTwo banks, Banco Provincia and Banco Hipotecario, alr

56、eady have issued inflation-linked bonds totaling ARS2 billion, and most banks have begun to offer inflation-linked fixed-term deposits. However, those funding sources alone have proven to be insufficient in meeting banks needs. Consequently, banks have been funding much of their inflation-adjusted m

57、ortgage lending with short-term peso instruments, creating balance sheet maturity and interest rate mismatches. Although these mismatches are limited considering the small size of the inflation-indexed mortgage portfolio, if banks were to meet their aggressive growth targets for these loans in the coming years, they would need both on- and off-balance-sheet funding alter