Weekly Credit Update

Transcription

Weekly Credit Update
27 October 2015
Analysts
Mads Rosendal
+45 45 14 88 79
madro@danskebank.com
Katrine Jensen
+45 45 12 80 56
katri@danskebank.com
Investment Research
www.danskebank.com/CI
Important disclosures and certifications are contained from page 44 of this report
Contents
- General credit market news and current themes
- Scandi High Yield
- Scandi Investment Grade
- Credit indicators
- Coverage universe, credit ratings and recommendations
2
What's on our mind
- General credit market news
• With the reporting season well underway, last week saw a
significant improvement in risk sentiment which came on
the back of a supportive tone from the ECB and the
Chinese central Bank.
• European credit indices closed significantly tighter with
iTraxx Main tightening 10bp to close at 70bp, while iTraxx
Crossover tightened almost 40bp to close at 292bp.
• Mario Draghi indicated that the ECB was preparing to
extend its bond-buying programme in December, which will
be supportive for the overall risk sentiment on European
credit markets going forward.
• New issue activity in the Nordic region was relatively
subdued overall but Verisure Holding AB (Sweden) came to
the market with a multitranche EUR400m (8Y FRN),
SEK2.8bn (8Y FRN) and EUR700m (7Y FIXED).
• The reporting season was kicked into gear last week with a
slew of reports from Nordic Financials and Corporates.
Overall, most reports have been solid with most misses
coming from commodity-related sectors. For more details
please see our HY and Investment Grade news section(s)
in this report.
Sources: Bloomberg, Danske Bank Markets (both charts)
3
Scandi High Yield
4
Stena 2020 high yield switch ideas (published on 1 October 2015)
 On 31 August we changed our recommendation to ´Underweight` on Stena’s bonds. Please see
Stena Q2 15 Credit Update – Outlook dark in Drilling
 Fundamentally, we see increased credit risk in Stena and recommend investors switch into names
with same or stronger credit profiles, such as Volvo (hybrid) or TDC (hybrid). Please see the key
details of proposed switches out of Stena 2020 on the following pages.
Z-spd, EUR
750
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0
Nordic BB-
VLVY 4.2%
2075
TDCDC 3.5%
STENA
3015
7.875% 2020
0
1
2
3
4
5
6
7
8
Source: Bloomberg, Moody’s, Danske Bank Markets
Nordic BB
9
10
11
12
Years to
maturity
Switch idea (1/2) Sell Stena 2020, Buy Volvo hybrid call 2020
(published on 1 October 2015)
 Add 0.2 years of Volvo exposure (to first call) and earn approx. the same yield/spread.
 Lower credit risk in Volvo than in Stena.
 S&P changed the outlook to stable (from negative) on Volvo’s ‘BBB’ corporate credit rating on 29 September. See
also Volvo Q2 15 credit update: above expectations but outlook softening
SELL Stena 7.875% 2020
BUY –
Volvo 4.2% hybrid call 2020
Difference
Recommendation
UNDERWEIGHT
MARKETWEIGHT
-
ISIN:
XS0495219874
XS1150673892
-
EUR
EUR
-
‘B2’ / ‘BB’
‘Ba1’ / ‘NR’
+4 notches / n.a.
Senior unsecured
Hybrid instrument
-
Coupon:
7.875%
4.200%
-3.675pp
Maturity:
March 15, 2020
1st call, June 10, 2020
(final legal maturity 2075)
+0.2year (measured to 1st
call date)
110.50 (indicative, bid)
95.50 (indicative, ask)
-15.00
Yes, @ benchmark +50bps
or at price of 101 in case of
change of control event.
Yes, @ price of100 from1st
call date onwards.
-
5.27% p.a.
5.30% p.a.
+0.03% p.a.
+494bp
+500bp
+6bp
Currency
Credit ratings:
Type of instrument:
Cash price:
Callable
YTM:
Z-spread:
Source: Bloomberg, Danske Bank Markets.
Switch idea (2/2) Sell Stena 2020, Buy TDC hybrid call 2021 (published on
1 October 2015)
 Add one year of TDC exposure (to first call) and give up a yield of 0.21% per year.
 Lower credit risk in TDC than in Stena.
 Negative spread differential of around 27bp seems acceptable given TDC’s higher credit rating.
 TDC aims at maintaining an investment grade corporate credit rating.
SELL STENA 7.875% 2020
BUY –TDC 3.5% hybrid call
2021
Difference
Recommendation
UNDERWEIGHT
MARKETWEIGHT
-
ISIN:
XS0495219874
XS1195581159
-
EUR
EUR
-
‘B2’ / ‘BB’
‘Ba2’ / ‘BB+’
+3 notches /+1 notch
Senior unsecured
Hybrid instrument
-
Coupon:
7.875%
3.500%
-4.375pp
Maturity:
March 15, 2020
1st call, February 26, 2021
(final legal maturity 3015)
+1.0year (measured to 1st
call date)
110.50 (indicative, bid)
92.75 (indicative, ask)
-17.75
Yes, @ benchmark +50bps
or at price of 101 in case of
change of control event.
Yes, @ price of100 from1st
call date onwards.
-
YTM:
5.27% p.a.
5.06% p.a.
-0.21% p.a.
Z-spread:
+494bps
+467bps
-27bps
Currency
Credit ratings:
Type of instrument:
Cash price:
Callable
Source: Bloomberg, Danske Bank Markets.
Recent trade ideas (high yield)
Recent ideas
Type
Switch
Trade
Sell Stena 2020, Buy TDC
hybrid
Idea
Fundamentally, we see increased credit risk in Stena and
recommend investors switch into names with same or
stronger credit profiles such as TDC (hybrid).
Opened
Fundamentally, we see increased credit risk in Stena and
recommend investors switch into names with same or
stronger credit profiles such as Volvo (hybrid).
Bonds trade tight to `BB-`curve and bonds no longer
attractive. We take profit on trade initiated 27 February
2015 (TR: 3.9% / ann. TR 7.9%).
Opened
Switch
Sell Stena 2020, Buy Volvo
hybrid
Outright
Close of Trade Tallink NOK
2018.
Currency trade
Sell SSAB 2019 (SEK) and BUY The spread between the SSAB 2019 (SEK) and SSAB
(EUR) 2019 is too wide
SSAB 2019 (EUR)
Outright
Outright
Outright
Currency trade
Buy Volvo 2075 Hybrid
The Volvo 4.2% 2075 Hybrid currently trades at
attractive levels, in our view, with a pick-up of around 2025bp to the rating implied spread.
Start spread
Start spread
Opened
Start spread
347
Close of trade SSAB
Recent performance in the SSAB EUR bond has closed
the earlier 19bps gap between the EUR and the SEK
2019 bonds.
Opened
EGASDK '20
440
Start spread
Opened
Outright
08 Sep 2015
37
16 Jun 2015
The Akelius Residential SEK 2019 FRN 3M
Stibor+240bps trades wide relative to other similar
unrated SEK bonds.
Source: Danske Bank Markets
6
Start spread
Opened
Buy Akelius Residential 2019
in SEK
Buy Tallink 2018.
01 Oct 2015
20 Aug 2015
Opened
Outright
-27
Opened
In our view the Destia 2019 FRN trades at a fairly
attractive spread when compared to our B+ indicative
senior unsecured rating. This is in our view most likely a
combination of low liquidity and Destia’s PE ownership.
Buy Destia 2019
01 Oct 2015
Start spread
Start spread
26 May 2015
433
13 Apr 2015
225
10 Mar 2015
Start spread
-2
Opened
Start spread
EGASDK '20's, which we see as 'B' indicatively trade way Opened
too cheap relative to the industrial 'B' curve
Start spread
27 Feb 2015
470
02 Feb 2015
664
FRN Tallink 2018 in NOK trades cheap to a global
median ‘BB-’ credit curve (converted into NOK).
See the end of this presentation for a list of our coverage including shadow ratings and recommendations
8
Best and worst performers (Nordic coverage universe)
- High yield
1 month in local currencies
Olympic Ship AS NOK 2017
-206 Teekay Offshore Partners LP NOK 2016
-215
-164 SAS AB SEK 2017
-80
Solstad Offshore ASA NOK 2016
-106 Hoist Kredit AB SEK 2016
-77
Odfjell SE NOK 2017
-101 Color Group AS NOK 2017
-61
Odfjell SE NOK 2018
-96
Hoist Kredit AB EUR 2017
-46
BW Offshore Ltd NOK 2019
-95
Prosafe SE NOK 2016
-38
SAS AB SEK 2019
-68 Stockmann OYJ Abp EUR 2018
-24
BW Offshore Ltd NOK 2018
-56
-11
Stolt-Nielsen Ltd NOK 2021
-51
Meda AB SEK 2019
-8
Outokumpu OYJ EUR 2019
-51
Beerenberg Holdco II AS NOK 2018
Teekay Offshore Partners LP/Teekay…
94
Prosafe SE NOK 2017
405
Seadrill Ltd NOK 2018
95
North Atlantic Drilling Ltd USD 2019
488
Fred Olsen Energy ASA NOK 2016
106
Seadrill Ltd USD 2017
531
Seadrill Ltd USD 2017
159
Seadrill Ltd SEK 2019
607
Solstad Offshore ASA NOK 2019
179
Teekay Offshore Partners LP/Teekay…
203
1,424
270
Farstad Shipping ASA NOK 2018
1,458
386
500
Nynas AB SEK 2018
387
1,370
1000
-335
Prosafe SE NOK 2016
92
1500
YTD in local currencies
0
-500
Change in local currencies (bp)
927
2,650
2,760
3000 2500 2000 1500 1000 500
0
-500
Source: Bloomberg, Danske Bank Markets (both charts)
9
Danske Bank Markets Nordic High-Yield Index
• In tandem with a strong European credit market, we saw
positive secondary Nordic High Yield markets during last
week. Spreads tightened some 12bp over the week.
• The widening trend since the summer seems to have
stopped in October, where the HY index spreads have
remained range bound around the ASW +460 level.
• Last week we saw Verisure Holding AB (Sweden) issue
EUR400m (8Y), SEK2.8bn (8Y) and EUR700m (7Y) in new
high yield bonds .
Danske Bank Markets Nordic High-Yield Index
106.0
105.5
105.0
104.5
104.0
103.5
103.0
102.5
102.0
101.5
101.0
100.5
100.0
Dec-2014
480
460
440
420
400
380
360
340
320
300
Mar-2015
Jun-2015
Sep-2015
DBM Hedged NOK Nordic HY Index Value
DBM Hedged EUR Nordic HY Index Value
DBM Nordic HY Index, ASW-spread (bps). RHS
Key index statistics
Date
Yield
ASW spread, bps
# Bonds
AVG credit rating
Avg duration
TR since start
TR YTD
TR MTD
Index sector breakdown
Index start
Index end
Change
31-dec-2014 23-okt-2015
4.7%
430
456
26
110
BB
2.8
3.1%
3.1%
0.6%
Source: Bloomberg, Danske Bank Markets [all tables and charts]
Real estate
13%
Technology
2%
Utilities
3%
Consumer,
Cyclical
6%
Communica
tions
9%
Industrial
15%
Diversified
4%
Basic
Materials
15%
Consumer,
non-cycli.
10%
Energy
16%
10
Recent Nordic high-yield issuance
Selected new issues (High Yield)
Date
Issuer
Coupon
CCY Volume
Maturity
S&P / Mdy / Fitch ASW/DM
21/10/2015
Verisure Holding Ab
STIB3M +725bps
SEK
2 816 m
Oct/23
B / Caa1e /
725
21/10/2015
Verisure Holding Ab
EUR003M +725bps
EUR
400 m
Oct/23
B / Caa1e /
725
15/10/2015
Verisure Holding Ab
6%
EUR
700 m
Nov/22
B / (P)B1 /
591
01/10/2015
Finnair Oyj (Hybrid)
7.875%
EUR
200 m
PERP
/ /
500
16/09/2015
Akelius Residential Ab
3.375%
EUR
300 m
Sep/20
BB+ / /
300
03/09/2015
Lock As
7%
EUR
30 m
Aug/21
B+ / B2 /
505
03/09/2015
Lock As
5.5%
EUR
200 m
Aug/20
B+ / B2 /
550
03/09/2015
Np3 Fastigheter
STIB3M +490bps
SEK
300 m
Oct/18
/ /
490
02/09/2015
Sagax Ab
EUR006M +350bps
EUR
30 m
Sep/20
/ /
350
13/07/2015
Boa Offshore As
NIBOR3M +1000bps
NOK
150 m
Dec/18
/ /
1000
06/07/2015
Gripship As
NIBOR3M +650bps
NOK
210 m
Jul/18
/ /
650
03/07/2015
Digiplex Norway As
NIBOR3M +375bps
NOK
575 m
Jul/19
/ /
375
26/06/2015
Fastighets Gronlandet So
STIB3M +275bps
SEK
425 m
Jun/21
/ /
275
24/06/2015
Solteq Oyj
6%
EUR
27 m
Jul/20
/ /
535
22/06/2015
Uppfinnaren 1 Ab
10%
SEK
175 m
PERP
/ /
775
10/06/2015
Sagax Ab
STIB3M +320bps
SEK
300 m
Jun/20
/ /
320
17/06/2015
Func Food Group
EUR003M +900bps
EUR
38 m
Jun/19
/ /
900
03/06/2015
Bw Offshore Ltd
NIBOR3M +425bps
NOK
900 m
Jun/20
/ /
425
28/05/2015
Hoegh Lng Holdings
US0003M +500bps
USD
130 m
Jun/20
/ /
500
25/03/2015
Corem Property Grp Ab
STIB3M +350bps
SEK
750 m
Apr/18
/ /
350
22/05/2015
Nelja Energia As
EUR006M +650bps
EUR
50 m
Jun/21
/ /
650
21/05/2015
Color Group Asa
NIBOR3M +485bps
NOK
700 m
Jun/20
/ /
485
21/05/2015
Technopolis Plc
3.75%
EUR
150 m
May/20
/ /
340
12/05/2015
Norwegian Air Shuttle As
NIBOR3M +575bps
NOK
1 000 m
May/18
/ /
575
11
Company news from the past week (high yield)
Name
Outokumpu
EG
Stora Enso
News
Outokumpu (DBM:'B' / NO): Somewhat surprisingly to us, Oukokumpu has announced a CEO change.
Roeland Baan will step up to replace the current CEO Mika Seitovirta. Baan is currently the Executive
Vice President and CEO of Aleris Europe and Asia. Aleris is a global leader in aluminum rolled
products. Before joining Aleris, Baan was the Executive Vice President and CEO of Mittal Steel Europe
and subsequently Executive Vice President and a member of the Management Committee of the
combined Arcelor Mittal Group. Overall, the new CEO seems highly credible with multiple years of
industry expertise and experience in driving turnarounds. However, to us the negative performance of
Outokumpu this year is most likely not a result of wrong decision-making by the current CEO but more
due to adverse market conditions beyond the control of management, such as falling nickel pricing,
ever-increasing Chinese steel exports and production problems, i.e. the new CEO will have his work cut
out and as long as the market is as weak as it is now, we don’t expect to see an immediate turnaround
in financial results. At best, we believe this should improve sentiment on Outokumpu until the Q3
results in ten days time.
EG (B) announces that it will not do a tab issue of its current DKK1.1bn outstanding bond. Instead, EG
will raise senior unsecured funding through a bank loan. The funds will be used to redeem debt at the
newly acquired Silkeborg Data. This development is credit positive for the existing outstanding bonds,
as there will be no primary issuance supply to weigh on secondary spreads. So in summary, the
aftermath from the Silkeborg acquisition ends up being a net positive for EG's current bondholders, as
business risk and financial risk will be slightly improved and because there will be no new primary
supply (in the short term at least).
Stora Enso (MW): Stora came out with Q3 results. No big surprises, as the result had already been
preannounced some two weeks ago, but nonetheless a very strong result. Sales increased about 5%
ex. paper and were flat including paper. The strength of the report was an increase in the EBITDA of
around 17% compared to last year on the back of favourable currency effects combined with a ramp
up of the newly inaugurated Montes del Plata pulp mill in South America. Reported net debt to EBITDA
declined to around 2.5x vs. 2.8x in the previous quarter. Overall, we view this as a credit neutral result
due to the pre-announcement and we do not expect to see any impact on spreads.
Implication
Credit neutral
Credit positive
Credit neutral
12
PGS
Dolphin
Corem
PGS: Q3 numbers in line, revenues 13% behind consensus, EBITDA 2% behind. Covenants on the RCF
renegotiated from 2.75x to 4x, with outstanding remaining at USD500m, creating more financial
headroom. Outlook very negative with Q4 Q1 margins to be adversely impacted by weakening market
with FY15 EBITDA expected to be USD500m, in line with consensus. As expected, the new build due
to be delivered in Q3 16 is agreed to be pushed out to Q1 17. PGS is taking over the Sanco Sword and
Saco Swift vessel charters from Dolphin, very negative for Dolphin. PGS will stack to V –class vessels
at delivery of the Sanco vessels in Q1 16 to keep the market balance stable. Order book at USD245m,
slightly down from Q2, with 85% booked for Q4 and 50% booked for Q1. All in all, we see this as a
positive report for PGS, as more financial headroom and the move to take out further capacity
outweighs the negative outlook with FY EBITDA expected to be in line with consensus.
Credit negative that PGS is taking over two of its vessels charters in Q1 16, putting Dolphin’s fleet
below critical mass at only three seismic vessels
Corem (DBM: BB-) reported a fairly uneventful quarter with the exception of the bid for Tribona (which,
as expected, it withdrew on Thursday evening following Klövern’s announcement that it has sold its
shares in Tribona to Catena). Rental income decreased slightly due to somewhat higher vacancies
compared to last year. Positively, the occupancy rate increased by one percentage point to 90% at the
end of Q3. Margins remain high with NOI margin at 79%. Cash flow was negative by SEK280m
following net repayment of loans by SEK154m, acquisitions of properties of SEK122m and capex of
SEK122m. All in all, this resulted in an unchanged net LTV of 73% and including the preference
shares 81% (not adjusted for the SEK1.3bn stake in Klövern). The LTM EBITDA/interest coverage
was also unchanged at 1.8x (including preference shares 1.1x). In our view, a credit neutral report for
Corem. As pointed out in our SEK Credit Market Trends published this week, we find good value in the
short Corem 17 bonds.
Credit positive
Credit negative
Credit neutral
13
Name
Norwegian
Victoria Park
News
Norwegian (BB-/NO; B+/NO) reported a significant improvement y/y in Q3 15. EBITDA was NOK1.5bn
vs. NOK0.7bn in Q3 14. The report demonstrates a strong underlying business improvement and
increases the belief in its ability to prosper on its long-haul operations (Q3 14 was impacted by startup problems on long haul). The EBITDA-margin was 20.4% v.s 11.5% in Q3 14. Net profit was
NOK833m vs. cons. of NOK897m. However, in the volatile airline industry not too much should be put
into this, in our view. Unit cost ex fuel was up 15% y/y to NOK0.30 – however, adjusted for the
depreciation of NOK against USD and EUR affects unit cost by 10% y/y - and adjusted for currency
and the rise in passengers Norwegian claims that unit cost ex fuel decreased by 2%. Norwegian
guides for production growth of 5% y/y in 2015 and 18% y/y in 2016 due to the fleet expansion.
Norwegian has hedged 31% of expected fuel consumption in Q4 15 and 36% of expected fuel
consumption in 2016 (9% for 2017). Net debt rose to NOK15.5bn at end-Q3 15 from NOK11.3bn at
end-2014 due to the sizeable fleet expansion, which left the equity ratio of 11% - up from 9% end2014. Norwegian guides for capex of NOK5.5bn in 2015 and NOK8.4 for 2016. This will keep metrics
subdued. We expect adj. net debt of EBITDA of 7x for 2016 (based on reported EBITDA of NOK2.6bn
2016E) - and further deleveraging depends on the level of EBITDA-generation possible, which remains
to be seen. Over the past two-three quarters, Norwegian has fared well operationally, which gives rise
to some optimism regarding the company's ability to deleverage to be commensurate with our BB(corporate) and B+ (bond) shadow rating - but the stretched financial metrics (although mitigated by
state guaranteed funding from Boeing) is the reason why we keep our Negative Outlook on our shadow
ratings. Overall, a credit neutral report from Norwegian, in our view.
At first glance an ok Q3 report from Victoria Park (DBM: BB-; bonds B+). Due to earlier acquisitions,
rental income is up by 100% to SEK168m with operating net result of SEK94m (vs SEK43m in Q3
2014). Loan to value ratio stood at 58.6% at end September, before the acquisition of SEK531m of
properties in the city of Borås. Still, leverage remains well in line with the newly communicated lower
financial policy leverage target of 65% LTV. Victoria Park has deemed that it has both the capacity to
maintain a leverage of 65% vs earlier 70%, to continue to grow, and to also pay some dividend (25%
of the result vs earlier no dividends). In Q3, VP managed to achieve a rental increase of 3% in Malmö
which will come through gradually in the coming quarters. All in all, we are comfortable with our BB/B+ ratings on Victoria Park and its bonds and the 2018 bond remains one of our top picks in the SEK
property universe.
Implication
Credit neutral
Credit neutral
14
Name
SSAB
Akelius
Meda
Wihlborgs
Fastpartner
News
SSAB (BB-): SSAB released its Q3 results, which missed expectations with earnings (EBIT) of SEK191m vs. Bloomberg consensus of SEK15m. The quarter was adversely affected by negative
currency effects of around SEK200m. Compared with the second quarter of 2015, operating
profit/loss was down by SEK492m. Lower fixed and variable costs (SEK550m) impacted positively on
earnings, whereas lower volumes (SEK570m), lower prices SEK250m), currency effects (SEK150m)
and lower capacity utilisation (SEK80m) impacted negatively on earnings. SSAB expects demand for
steel to remain strong in 2016; however, given the overcapacity and high exports from China (monthly
exports reached an all time high in September) profitability is expected to remain muted. Net debt
increased by SEK796m during Q3 and there is limited scope for further deleveraging towards yearend given the weak outlook for profitability. Overall, a credit negative report from SSAB which shows
that they also are not immune to the immense pressure from Chinese steel producers. We would
expect some spread widening on the back of this report.
Akelius acquires 279 apartments in Washington. The acquisition is Akelius’s first in Washington,
price SEK468m. After the acquisition, Akelius owns 15 residential properties with 1,485 apartments
in the US.
With regard to Swedish specialty pharma company Meda (DBM: BB-/Stable) - it may be worth keeping
an eye on Canadian industry peer Valeant (BB-/Ba3). The company has over the years pursued an
aggressive M&A strategy favoured by the equity market. However, following a combination of
comments from US politicians that pharma companies have been raising prices too much (putting the
spotlight especially on Valeant), and claims that Valeant is pursuing an aggressive way of accounting
for acquired companies, its shares have dropped some 55%, while the CDS has moved from the +200
level to now roughly 450bp. While Meda only has a limited presence in the US (some 13-14% of total
revenues), all the above may create some nervousness towards the whole specialty pharma sector.
Strong Q3 report from Wihlborgs. Rental income up by 3% and operating result by 11%. Economic
occupancy rate unchanged at 91%. Property value of SEK27bn at end September, with a slight decline
in loan to value to 57%, which gives some headroom in our 'BB+' credit view (with BB on the bonds).
Wihlborg SEK bond trades at a tight level vs sector peers.
FastPatner presents a strong Q3 report. Rental income up by a whopping 23%, mainly due to earlier
acquisitions. Operating net up by 29%, and a further slight increase in property values. Interest
coverage up to 3.2x from 2.7x in 2014, and a slight improvement in solidity. We see no reason to
change our 'BB'/Stable credit view on the company (with bonds at 'BB-'). FastPartners SEK bonds look
fairly priced relative to sector peers in the 'BB' category.
Implication
Credit negative
Credit neutral
Credit negative
Credit positive
Credit positive
15
Name
Heimstaden
Corem
Akelius
News
Swedish real estate company Heimstaden (DBM: BB; bonds BB-) announced it is selling all its
properties in the city of Trelleborg, consisting of 688 apartments with 58,000 square metres to
Nordhalla. Sales price not disclosed. Heimstaden owns 40% of Nordhalla. At end Q2, Heimstaden had
a net LTV of 51%, i.e. with some financial headroom within our 'BB' rating. We see today's
announcement as broadly credit neutral as we think Heimstaden may still carry out further
acquisitions, but within the company's communicated financial policy. Heimstaden remains one of our
favoured companies in the Swedish property sector. SEK bonds now look fairly valued vs peers.
Catena has acquired Klövern’s Tribona shares (which Corem had placed a bid on). Klövern will be paid
in cash (about SEK600m). Corem is now out of the picture regarding the Tribona acquisition and
hence there will be no financial effects for the company.
Akelius (Corp level BBB-, bonds BB+) acquires 279 apartments in Boston. Two central properties
built in 2014 and the acquisitions are Akelius’s first in Boston. Total purchase price SEK1,385m.
Implication
Credit neutral
Credit neutral
Credit neutral
16
Scandi Investment Grade
17
Overweight – Vestas EUR 2.75% 2022
IG credit profile but priced as HY (first published on 19 August)
Indicative ASW offer
(bps)
290
280
270
260
250
240
230
220
210
200
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
2014
•
On 19 August, Vestas delivered strong and credit
positive Q2 15 results, with a robust globally spread
order intake, a record order backlog, healthy cash flows
and very strong credit metrics.
•
Given the volatile global wind turbine markets, the high
credit quality of some competitors (GE, Siemens), the
recent very harsh restructuring of the company and the
prudent financial targets introduced (e.g. maximum
target net debt/EBITDA < 1x ), we do not expect the
group to accelerate future re-leveraging aggressively in
an unbalanced way.
•
The key risk factor for this name remains political. The
global wind turbine industry is likely to be dependent on
subsidies for years to come, although less and less so
as the turbine produced cost per MWh is reduced. This
is a strategic priority for Vestas.
•
Given our view of Vestas as a ‘BBB-’ credit, we
reiterate that we regard the current pricing of the
2.75% 2022 as attractive at an ASW of +270bp.
•
In our view, a ‘fair’ credit spread for this type of bond
would be in the range of 125-150bp, reflecting a
‘political/volatility’ spread add-on of 40-65bp to the ‘BBB-’
curve.
VWSDC '22
(NR/NR)
Corporates: BBB-
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: Bloomberg, Moody’s, Danske Bank Markets
See Vestas Q2 15: Strong performance – bonds
attractively priced, 19 August.
18
Recent trade ideas (investment grade)
Recent ideas
Type
Outright
Trade
Buy Vestas 2022 (revisited).
Outright
Buy Nykredit AT1 (perpetual)
Nykredit has issued an AT1 with a 7.125% trigger.This
hybrid trade attractive to Nordic peers.
Outright
Buy Nykredit T2 CoCo first call
2021 (dated)
Nykredit has issued a tier 2 bond as a CoCo with a 7%
trigger.We believe the T2 CoCo trades with a discount
to peers because of the CoCo feature.
Sector spread
Idea
The Vestas EUR 2.75% 2022 trades cheap to a EUR
corporate BBB. curve.
Switch from Securitas 2018 to We recommend to buy the ISS Global A/S 2020 as we
believe valuation is attractive compared to ISS Global
ISS Global A/S 2020
A/S’ BBB-/Positive Outlook from S&P as the bond is
currently trading close to the ‘BBB-’ curve.
Opened
Start spread
Opened
Start spread
Opened
24 Aug 2015
270
10 Aug 2015
511
10 Aug 2015
Start spread
361
Opened
Start spread
03 Jun 2015
32
See the end of this presentation for a list of our coverage including shadow ratings and recommendations
19
Best and worst performers (Nordic coverage universe)
- Investment grade
1 week in local currencies
-7
-7
TeliaSonera AB EUR 2020
-13
Carlsberg Breweries A/S EUR 2022
Nordea Bank AB EUR 2025
-7
-9
-9
Nordea Bank AB EUR 2022
-6
-8
Skandinaviska Enskilda Banken AB EUR…
-6
-6
Statoil ASA EUR 2025
-6
Investor AB EUR 2023
-6
-6
-6
Telenor ASA EUR 2020
-6
Pohjola Bank Oyj EUR 2018
-6
Fingrid OYJ EUR 2024
-6
2
Sampo Oyj EUR 2017
14
2
14
2
SBAB Bank AB SEK 2018
14
Svenska Cellulosa AB SCA EUR 2016
2
DONG Energy A/S EUR 2016
14
3
3
Lansforsakringar Bank AB SEK 2020
4
Danske Bank A/S SEK 2019
7
Neste Oyj EUR 2016
7
Fortum OYJ EUR 2016
0
-5
-10
15
16
18
Svenska Cellulosa AB SCA EUR 2016
4
5
-14
-6
-5
10
1 month in local currencies
20
Vattenfall AB EUR 2024
20
Neste Oyj EUR 2016
Fortum OYJ EUR 2016
23
30
20
10
0
-10
-20
Source: Bloomberg, Danske Bank Markets (both charts)
20
Selected new investment-grade issues
Date
Issuer
Coupon
CCY Volume
Maturity
S&P / Mdy / Fitch ASW/DM
21/10/2015
Eika Boligkreditt As
0.625%
EUR
500 m
Oct/21
/ Aa1e /
22
20/10/2015
Dongfeng Motor Hong Kong
1.6%
EUR
500 m
Oct/18
/ A1 / Ae
150
19/10/2015
Aktia Bank Plc
STIB3M +95bps
SEK
800 m
Oct/18
A- / A3 / WD
95
19/10/2015
Wells Fargo & Company
2%
EUR
1 500 m
Apr/26
A+ / A2 / AA-
103
21
Company news from the past week (investment grade)
Name
Nordea
Securitas
News
Nordea (UW): the Polish regulator tells the largest Polish banks to set aside more capital to help cope
with Swiss-franc loan portfolios, according to Reuters. Nordea still sits on the majority of the risk from
the Polish mortgage loans it sold off to PKO in June 2013 due to a loss guarantee running until April
2018, in which Nordea will have to cover half of the loan losses above 0.4% per annum. The Polish
Lower House just recently decided that 90% of the loss from converting CHF loans back to PLN will
have to be covered by the banks. The law is not final yet and may be amended. Nordea has cEUR3bn of
Polish mortgage loans, which means that this could potentially cost the bank some hundred millions
EUR in a bad scenario, we estimate. Not enough to rock the boat, but a reminder of why we believe
Nordea's large diversification is hitting the bank from several sides these years (Russian exposure,
Norway due to oil, Finland due to low economic activity and now also Poland). This could mean that a
solution for the Polish mortgage loans in CHF could be near and hence the loss guarantee from
Nordea be effective.
Securitas (MW) has announced the acquisition of Diebold Inc. Electronic Security Business in the US.
The purchase price is approx. SEK2.9bn (EV), which equates to approx. 11x EBITDA for 2015
(Securitas trades 9x). This high-tech security company's services include intrusion alarms, fire alarms
and monitoring of elevators with more than 55,000 monitored customer locations. We are not
surprised by this acquisition, as Securitas lacks scale in the higher-margin high-tech security
business to mitigate fierce price pressure in manned guarding – hence, in this respect we believe that
the acquisition will improve Securitas’s overall business risk profile somewhat. However, we believe
that due to the acquisition adj. net debt to EBITDA will increase to c. 3.2x from the 2.7x reported in Q2
15 (Q3 15 to be reported on 4.Nov) and we believe that S&P will remove the Positive Outlook on its
BBB rating for Securitas. However, we believe that Securitas will be able to maintain its BBB rating, as
we think S&P will give Securitas time to deleverage over the coming 18-24 months (according to
Securitas ,the acquisition will be EPS enhancing from 2016). Overall, we maintain our MW
recommendation on Securitas and expect spreads to widen some15bp on this announcement due to
the higher leverage, integration risk and potential removal of Positive Outlook from S&P.
Implication
Credit negative
Credit negative
22
Name
Vattenfall
APMM
LKAB
Neste
News
Vattenfall (MW) has confirmed that 1GW out of its total installed capacity of 7.8GW of German lignite
will likely be included in the newly German proposed capacity scheme. Vattenfall’s board has yet to
make a final decision. Vattenfall mentions that the rest of the capacity will be running as previously.
The 1GW of capacity will be running for around four years after it has been put in reserve (within the
next couple of years). The whole industry will receive around EUR230m / year and Vattenfall
comprises roughly 37% of this. This is broadly in line with expectations and previous unconfirmed
reports. Slightly positive in the sense that we now have some more clarity on the German regulatory
regime around lignite, which should make it easier for Vattenfall to sell these assets.
APMM (MW): Maersk Oil cuts 10-12% of its current workforce, aiming to reduce operating costs by
20% by end of 2016, as the company responds to changed market conditions. This should not come
as a surprise, as APMM already flagged this in connection with the Q2 15 report. APMM will release
Q3 15 on 6 November – however, steam bas already been taken off due to profit warning last Friday.
LKAB posted a weak result for Q3, where net sales declined by 16% and the underlying operating
margin fell from 22% to 19%. Due to the persistently low global iron ore prices and an expectation
that market dynamics will not reverse any time soon LKAB decided to recognise impairment losses of
SEK7.1bn related to property, plant and equipment. Importantly, this impairment does effect equity
but not the company's cash flow. In fact, the Q3 operating cash flow was positive SEK813m. This can
be compared to investments of SEK1.4bn during the quarter. Hence, leverage rose somewhat further
but LKAB's balance sheet remains very strong with a gross cash position of SEK15.2bn and net debt
of SEK1.8bn (including provisions for the urban transformation of SEK12bn in the debt calculation).
Focus is now with the new CEO on cost reductions, and the production growth volume target of 37m
tonnes has been deferred. We moved to a Negative outlook on our BBB+ credit view on LKAB
following Q2 results and intend to take a fresh look at this credit view after today's announcement. The
company's SEK bonds continue to trade at a tight level relative to peers in the BBB category.
Strong Q3 15 result from Neste (MW). Revenues fell 21% due to weaker liquids prices y/y. More
importantly, Group comparable EBITDA improved 35%, reflecting a very strong refinery margin in
traditional fuels and also better earnings in Neste’s renewable division. Neste’s result landed ahead of
market expectations. Neste’s credit metrics improved on the back of a strong Free Cash Flow, taking
adj. net debt to LTM EBITDA to 1.6x from 2x. Neste maintains its FY outlook, and we remain
comfortable with our ‘BBB-‘ indicative rating, reflecting a strong leverage level currently, but also
darker skies ahead due to weaker refinery margins.
Implication
Credit positive
Credit neutral
Credit negative
Credit positive
23
Name
Electrolux
APMM
Sandvik
News
Electrolux (MW) reported a solid set of Q3 15 figures with operating profit of SEK1.5bn (SEK1.3bn
consensus) which represents an 8% increase compared to Q3 14 based on flat margins. Revenue
increased by 9% y/y primarily driven by currency (6%) as organic growth was only 2% vs. 3% in H1
15. Organic growth was solid in Europe (5%) and North America (7%) whereas Latin America (-5%)
and Asia (-13%) were weak. Adj. net debt to LTM EBITDA declined to 1.6x from 2.0x Q3 14 - and
slightly up from 1.4x in Q2 15. Despite the solid result, we regard the Q3 15 report as credit neutral.
All eyes continue to be on the potential GE Appliances acquisition - Electrolux expects to close the
acquisition in 2015. We maintain our MW recommendation on Electrolux.
APMM (MW): Measured over the past 12 months, Maersk Line has accounted for 49% of APMM
Group operating cash flow – hence, a potential further prolonged weakening going into 2016 (the
container market is structurally oversupplied) in Maersk Line could make the Group more hesitant in
pursuing very large scale M&A in the oil segment. Should APMM pursue very large scale M&A in the
Oil industry at the same time as the container market is in limbo, it could raise investor concerns
regarding the Group’s commitment to the BBB+ rating. In this respect, it is our very clear belief that
APMM is committed to maintaining the BBB+ rating, as it has used the past years to build up
credibility around this and has stated this ambition many times in both financial reports and CMDs.
Sandvik (MW): Sandvik released Q3 results. At first glance, results look weak with sales some 7%
behind BBG consensus. Also, the EBIT declined by 7% y/y and the operating margin was 11.2% vs.
11.9% y/y. The result was weaker, as FX and ongoing cost savings could not offset the decline in
volumes. Organically, sales fell 8% y/y, which is worse than what we saw at SKF last weak. Before the
report Sandvik announced its intention to divest its mining systems business (about 25% of the
Sandvik Mining segment) but the Q3 report did not contain further updates on this, i.e. Sandvik has not
found a buyer just yet. Despite the soft result, cash flows were still strong and the overall reported net
debt fell by some SEK2.5bn. We see adj. net debt to EBITDA at around 2.5x and we expect Sandvik to
maintain its rating over the coming quarter, especially if Sandvik manages to find a buyer (and get a
decent price) for MS. We maintain our Marketweight recommendation on what we view as a decent
spread on the EUR denominated Sandvik 2026s.
Implication
Credit neutral
Credit neutral
Credit negative
24
Name
APMM
Volvo
Kemira
News
APMM (MW): Profit warning released. The profit warning was 100% related to Maersk Line, which is
being pressured by the low freight rates. APMM previously expected net profit of USD4.0bn based on
an underlying result contribution from Maersk Line above USD2.2bn. The Group's new expectation is
an underlying result of around USD3.4bn based on an underlying result in Maersk Line of around
USD1.6bn (hence a downgrade of net profit in Maersk Line of USD0.6bn). From a credit perspective
this is not a significant event and credit metrics will still be strong for the current BBB+ rating.
However, the weakness in Maersk Line and the container market is likely to expand into 2016. In our
view, this could make it less likely that APMM will pursue very significant M&A in the Oil segment and
more likely that APMM goes for smaller bolt on acquisitions in the oil segment (although these could
also be quite big) - which we would see as credit positive. Overall, we continue to see APMM as a high
quality name in the BBB+ space. We maintain our Marketweight recommendation, as we struggle to
see much upside at current valuation.
Volvo (MW): Volvo released its Q3 report on Friday morning; a very decent report at first glance. Adj.
EBIT at SEK5.4bn was 15% ahead of consensus with currency having a positive effect of SEK830m.
The ebit margin excluding restructuring was 6.9% excl. restructuring charges vs. 4.3% for the same
period last year. Order intakes were a tad below expectations (4%), which was mainly due to a very
weak Latin America and North America, which were down 54% and 40%, respectively. Europe, on the
other hand, was strong with orders increasing 11% y/y and Volvo has upgraded its FY truck order
forecast for the region. Positively, the CE credit provisions in China increased by SEK50m less than
expected (SEK293m vs. SEK350m cons.). Following the report, we still see adj. net debt to EBITDA at
around 2x, which is commensurate with the current BBB rating. Overall, a slightly credit positive
report but we view pricing of the Volvo senior curve to be inline with the rating. For more value we
advise investors to look at the recently issued Volvo hybrids.
Kemira (DBM:BBB-): Results were out Friday, looked to be in line with consensus on EBITDA while
beating slightly on revenues. Sales grew 15% y/y mainly on the back of the Akzo Nobel acquisition in
the pulp and paper chemicals segment. Organically, sales were roughly flat y/y. The oil and mining
business was not untouched by the lower US shale oil activity, but the decline has not been as bad as
feared. Leverage is still slightly elevated at around 3x times following the acquisition but we still expect
leverage to decline to about 2.8x by year-end 2015. Overall, a credit neutral result and we keep out
BBB- shadow rating on the name.
Implication
Credit negative
Credit positive
Credit neutral
25
Name
News
Saab presented a mixed report with sales above expectations while profitability remains weak.
Organic growth surprised on the positive side and increased by 11% and the outlook for 2015 was
again reiterated, leaving us with high expectations for the fourth quarter. We expect profitability to be
high on the agenda after the deal with Brazil regarding 36 Gripen NG was signed in the quarter. Credit
SAAB
metrics strengthened slightly due to improved cash flow and released working capital. Our current
rating assumes the company deleverages during the coming quarters to bring credit metrics to a level
consistent with our ‘BBB+ ’credit view.
Once again, the oil plunge caused no direct loan losses for DNB and generally speaking the Q3 results
were in line with expectations. Capital requirements were upped by the Norwegian FSA, forcing DNB
to continue its focus on building capital. We are pleased with this, but continue to believe the
DNB
uncertainty around future loan losses is too high for us to turn more positive. Underweight
recommendation maintained.
Swedbank reported solid Q3 results reflected in very strong financial ratios, return on equity of
13.5%, a loan loss ratio of 4bp, CET1 ratio of 23% and cost-income ratio of 43%. As Swedbank
Swedbank
trades very tight, especially in the senior space, we believe that its fundamental strength is already
reflected in the pricing of its bonds and therefore we maintain our Marketweight recommendation.
Nordea UW): The Q3 results gave no reason to be concerned as loan losses remained low, while
capitalisation increased despite earnings being hit by weak financial markets. That said, we continue
to be cautious about the period ahead given Nordea's relatively large exposure to oil, Russia and
Nordea
Finland. Thus, we continue to believe its bonds are too expensive and reiterate our Underweight
recommendation.
Low commissions hit SEB hard in Q3 as the bank is relatively dependent on fee income. Consequently,
the operating profit was 6% below expectations but otherwise a robust report. We maintain our
SEB
Overweight recommendation on SEB.
Handelsbanken (MW) disappointed on NII and followed its peers by reporting weak trading income in
its Q3 results. However, fundamentals remained strong and, as uncertainty is rising around some of
Handelsbanken
its peers mainly due to oil exposure (direct or indirect), Handelsbanken could once again be a safe
alternative. We thus maintain our Marketweight recommendation despite tight price levels.
Implication
Credit neutral
Credit positive
Credit positive
Credit neutral
Credit neutral
Credit negative
26
Name
Fortum
Metso
SBAB
News
Fortum’s (UW) Q3 15 result was weak and slightly behind market expectations. Group revenues are
down 23% y/y on lower power prices in the Nordics, lower earnings in Russia and also lower heat
earnings due to colder than normal weather. Group clean EBITDA falls 49% y/y. Results were weighed
by a EUR761m write down of the Oskarhamn nuclear units 1 and 2. Fortum remains net cash
following the network divestment and it remains unclear what the cash proceeds will be used for.
Fortum delays its earnings target in Russia, which is a negative surprise. Overall a slightly negative
report from Fortum at first glance.
Metso (MW): Q3 results out from Metso missed expectations on both sales and earnings. Sales were
EUR680m vs. Bloomberg consensus of EUR723m, while the EBITDA was about EUR10m below
consensus. Needless to say, the weakness was driven by low commodity prices affecting both the
mining and oil and gas industries which Metso supplies. Also, Metso is beginning to see mine closures
which now affect the service demand, which has otherwise been Metso's leg to fall back on.
Surprisingly to us, Metso has decided to keep its FY outlook for 2015, which could be seen as the main
positive to take out from the report. We continue to see leverage adj. net debt to EBITDA to be in line
with the rating and the group should be able to maintain its BBB rating over the interim. Spreads on
the Metso 2019's have widened recently and trade on the 'BBB-' rating implied EUR curve, hence the
bond offers good carry for the rating and downside is low should Metso be downgraded. Despite
attractive valuation we expect further negative newsflow over the interim and we keep our
Marketweight recommendation on the name.
SBAB (MW): reported Q3 results on par with Q2 adjusted for the fair value adj. of financial
instruments. Loan losses still insignificant at SEK3m for the quarter. RoE after tax of 10.5%. CET1
was 25.6% vs. minimum requirement of c.22%, so reasonable buffer. CEO says that "The situation in
the Swedish housing market is highly distressing. Soaring housing prices increase the risk level for our
customers, for us as a company and for the economy and society at large. This trend is not sustainable
in the long term. The housing shortage is becoming increasingly pressing as housing prices continue
to skyrocket. In some areas of Sweden, housing prices are increasing at a rate that in all likelihood,
extends far beyond any long-term realism." We tend to agree with that, at least we also believe the
largest risk for the Swedish banks currently is the housing market. However, a correction will likely hit
the consumption and i.e. the SME sector and hence not the mortgage sector. So SBAB is likely to be
sheltered from this despite the CEO's worry. All in all a rather uneventful quarter.
Implication
Credit negative
Credit negative
Credit neutral
27
Name
News
Nordax Bank (BBB- shadow by Danske): pre-provision profit on level with Q2 as the 3% growth in the
NII (positive) is neutralised by large trading income loss (SEK17m). Loan losses increased to SEK44m
or 1.7% in loan loss ratio, which was higher than the 1.2% reported for FY2014. This is of course a bit
negative, but the growth in problem loans of 9% YTD is not that worrying as it grew 18% in 2014.
Coverage ratio was unchanged 54%. ROE remained high at 20.4%, which gives a good first line of
defence and ability to build up capital, if needed. CET1 at 12.7% vs. 12.3% year-end. Capital req. is
Nordax Bank
c.8% including impact from 1.5% countercyclical buffer from next year. To conclude: Nordax is still a
highly profitable bank with good capitalisation. Increasing loan losses is a bit worrying and something
to watch, but coverage ratio remains reasonably high. Norway has become the largest market for
Nordax, so a worsening situation here could become a challenge in the future. However, we expect
Nordax credit models to show their robustness like they did in 2008-09.
Hemsö reported solid results, with a rental increase of 1.4% q/q but a decrease of 4% y/y due to
divestments. Leverage was unchanged while margins remained healthy. The replacement of the
shareholder loan with common equity changes the characteristics of the cash flow, with stronger
operating cash flow but overall neutral cash flow effects. The property portfolio contributed with
Hemsö
positive revaluation effects, while financial derivatives burdened the result in the quarter. Available
and undrawn credit facilities remain very strong. We consider Hemö’s bonds to trade in line with other
A-rated real estate names.
Volvo (MW) and Scania (MW): Scania out with an update on new truck orders. Demand remained
strong in Europe while emerging markets is still exhibiting weakness, especially Russia and Brazil.
Volvo and Scania
Overall, the bullish wording regarding Europe should be a positive readthrough to Volvo, which has the
majority of its exposure to Europe.
Avinor (MW): According to a government website, Norway will not increase airport fees for 2016 which is in-line with expectations. Over the past five years, the main driver of revenues has clearly
been sales and rental income, whereas passenger charges, takeoff charges have only contributed on a
minor scale. We continue to believe that the Norwegian government - which owns 100% of Avinor
Avinor
through the Ministry of Transport - will be a very strong supporter of Avinor. Also note that
outstanding bonds are subject to a change of control that is triggered if there are any changes to the
government’s 100% ownership of Avinor. We consider the news credit neutral and maintain our MW
on Avinor.
Implication
Credit negative
Credit neutral
Credit positive
Credit neutral
28
Name
Tele2
Husqvarna
Atlas Copco
TVO
News
Tele2 reported a strong set of Q3 15 numbers that beat consensus estimates. Revenues increased
by 3% y/y and EBITDA was down slightly y/y primarily due to the Dutch operations. Credit metrics
remained more or less unchanged from last quarter and we maintain our BBB credit rating on Tele2;
however, we expect the credit metrics to slightly worsen in 2016 due to ongoing investments in the
Netherlands.
Husqvarna presented a stable report operationally with increased operating margins and good cash
flow. Credit metrics continued to strengthen in the seasonally weak third quarter. According to the
company, realistically it will no longer be able to reach the target of a 10% EBIT margin in 2016 due to
unfavourable FX hedges. We retain our BBB- rating with positive outlook. We could raise this if the
margin recovery is sustainable and increases towards the 10% area, cash flow remains.
Atlas Copco (UW) Q3 15 overall inline with expectations - demand seen to remain at current level.
Due to poor SKF report and the fact that Atlas generates close to 25% of EBIT in the Mining industry the market had feared worse, so this report is a relief. Operating profit of SEK.5.3bn was record high
and in-line with consensus - up 28% y/y. Reported net debt to EBITDA declined to 0.7x in Q3 15 from
0.8x Q2 15. Overall, a credit neutral report but due to low expectations the market reaction could be
positive. We maintain our UW recommendation due to the tight pricing of the bonds. Although Atlas
has proven its very high quality over many industrial cycles, we believe valuation is rich at current
levels. Due to higher shareholder focus we do not expect rating agencies to change the current "A"
rating near-mid term. Furthermore, the end-market weakness is creating uncertainty going into 2016.
TVO delivered a Q3 15 report with no major news. It demonstrated an impressive performance with
load factors clearly in excess of 90% on its OL1 and OL2 reactors and with no outages, which we find
comforting from a credit perspective. Group revenues were slightly down due to lower power
production on the Meri-Pori coal station. Subsequently, Group revenues fell 7% y/y. TVO’s earnings
are irrelevant, though, as it is a not-for-profit company with its fixed costs TVO did not offer any news
on the ongoing arbitration with Areva/Siemens about a damages payment for the delayed OL3
reactor. Overall, it was a credit neutral result and we maintain our Overweight recommendation. A
downgrade to High Yield is not our core scenario and as such we think that bonds trade at cheap
levels.
Implication
Credit positive
Credit negative
Credit neutral
Credit neutral
29
Credit Indicators
30
Chart pack: euro spreads and returns
Euro IG ASW, iBoxx indices
IG total return, iBoxx indices, 2014-01=100
Euro HY ASW, Merrill Lynch indices
HY total return, Merrill Lynch indices, 2014-01=100
Source: Macrobond Financial, Danske Bank Markets [all charts]
31
Chart pack: relative value
iTraxx vs iBoxx
EUR CDS spreads – Nordic banks
Euro vs US CDS indices - IG (Markit)
Euro vs US HY bond indices (Merrill Lynch)
Source: Bloomberg, Macrobond Financial, Danske Bank Markets [all charts]
32
Chart pack: general market development
European swap and government yields
3M Libor, US and euro area
Euro swap curve spread
EUR/USD basis swaps
Source: Macrobond Financial , Danske Bank Markets [all charts]
33
Chart pack: high-yield funds flow
High yield US ETF fund flow
1,800
8,000
1,600
7,000
Cumulative ETF-flow MEUR
Cumulative ETF-flow MEUR
High-yield Europe ETF fund flow
1,400
1,200
1,000
800
600
400
200
0
dec- jan- feb- mar- apr- maj- junjul- aug- sep2014 20152015 2015 2015 2015 2015 2015 2015 2015
High Yield - Europe - Fixed Income
6,000
5,000
4,000
3,000
2,000
1,000
0
-1,000
dec- jan- feb- mar- apr- maj- jun-2 jul- aug- sep2014 20152015 2015 2015 2015 015 2015 2015 2015
High Yield - North America - Fixed Income
Source: Bloomberg, Danske Bank Markets [all charts]
34
Chart pack: fund flows
Europe, net sales
US, net sales
Sweden, net sales
Norway, net sales
35
Chart pack: macro
GDP y/y growth, calendar adjusted
Purchasing Manager Indices
Euro area y/y change in bank lending
Euro area lending standards
36
Coverage universe, credit ratings
and recommendations
37
Our coverage and shadow ratings 1 of 5
Ratings from S&P/Moody's/Fitch and Danske Bank Markets shadow ratings
Company
Ahlstrom Oyj
Akelius Residential Property Ab
Ambu A/S
Ap Moeller - Maersk A/S
Arla Foods Amba
Atlas Copco Ab
Avinor As
Bank 1 Oslo Akershus As
Bank Norwegian As
Beerenberg Holdco Ii As
Billerudkorsnas Ab
Bw Offshore
Cargotec Oyj
Carlsberg Breweries A/S
Cermaq Asa
Citycon Oyj
Color Group As
Com Hem Holding Ab
Corem Property Group Ab
Danfoss A/S
Danske Bank A/S
Deep Sea Supply
Dfds A/S
Dlg Finance As
Dna Ltd
Dnb Bank Asa
Dof Asa
Dof Subsea
Dolphin Geophysical
Dong Energy A/S
Dsv A/S
Eg Holding
Danske Bank
S&P
Moody's
Fitch
Analyst(s)
Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating Outlook
BBStable
M. Rosendal / J. Magnussen
BBB- Stable
E. Hjalmarsson / L. Landeman
BBB- Stable
J. Magnussen / M. Rosendal
BBB+ Stable Baa1
Pos
B. Børsting/J. Magnussen
BBB
Stable
M. Rosendal / B. Børsting
A
Stable
A2
Stable
M. Rosendal / E. Hjalmarsson
AAStable
A1
Stable
O. Heldal/B. Børsting
BBB+ Stable
L. Holm / K. Jensen
BBB
Stable
L. Holm / K. Jensen
B
Stable
Ø. Mossige
BBB- Stable
M. Rosendal / L. Landeman
BB+
Stable
Ø. Mossige
BBB- Stable
Baa2
Neg
BBB
Stable
B. Børsting / M. Rosendal
BB
Stable
K. Bakken
BBB
Stable Baa2
Stable
BBStable
B+
N. Ripa / B. Børsting
BBPos
O. Heldal / L. Landeman
BBStable
B+
BBB
Stable
J. Magnussen / B. Børsting
A
Stable
A2
Stable
A
Stable
BNeg
I. Båtvik / Ø. Mossige
BBB- Stable
BBStable
BBB- Stable
A+
Neg
Aa3
Stable
L. Holm / K. Jensen
B+
Neg
I. Båtvik/Ø. Mossige
B+
Neg
I. Båtvik
BBB+ Stable Baa1
Stable BBB+ Stable J. Magnussen / L. Landeman
BBB
Stable
B
Stable
J. Magnussen / N. Ripa
Recomm.
MARKETWEIGHT
UNDERWEIGHT
MARKETWEIGHT
MARKETWEIGHT
OVERWEIGHT
UNDERWEIGHT
MARKETWEIGHT
38
Danske Bank
S&P
Moody's
Fitch
Analyst(s)
Company
Eidesvik
B
Neg
Eika Boligkreditt As
AStable
L. Holm / K. Jensen
Eika Gruppen As
BBB
Stable
L. Holm / K. Jensen
Eksportfinans Asa
BBBPos
Ba3
Stable
L. Holm / K. Jensen
Electrolux Ab
BBB
Stable
Wr
WD
Elenia Oy
J. Magnussen / L. Landeman
Elisa Oyj
BBB+ Stable
Baa2
Stable
Entra Eiendom As
AStable
Farstad Shipping Asa
BB
Neg
BBI. Båtvik / Ø. Mossige
Fastpartner Ab
BB
Stable
BBL. Landeman / E. Hjalmarsson
Fingrid Oyj
A+
Stable
A1
Stable
A+
Stable
Finnair Oyj
BB
Stable
Fortum Oyj
BBB+ Stable
Baa1
Stable
ANeg
Fortum Varme Holding Samagt Med Stockholms Stad Ab
BBB+ Stable
Fred Olsen Energy Asa
BBStable
B+
S. Stormyr / B.K. Røed
G4S Plc
BBBStable
Getinge Ab
BB+
Neg
L. Landeman / E. Hjalmarsson
Golar Lng Partners Lp
BB
Stable
BBB.K. Røed / J. Meyer
Golden Close Maritime Corp Ltd
BS. Stormyr / B.K. Røed
Havila
CCC+
Neg
Heimstaden Ab
BB
Stable
BBL. Landeman / E. Hjalmarsson
Hemso Fastighets Ab
AStable
Hkscan Oyj
BB
Stable
Hoegh Lng Holdings Ltd
BBStable
B+
B.K. Røed / J. Meyer
Hoist Kredit Ab
BBStable
B+
G. Bergin / L. Landeman
Husqvarna Ab
BBBPos
Ikano Bank Ab
BBB
Stable
L. Holm / K. Jensen
Investor Ab
AAStable
A1
Stable
Iss A/S
BBBPos
J Lauritzen A/S
B
Stable
BB.K. Røed / J. Meyer
Jernhusen Ab
AStable
Jyske Bank A/S
AStable Baa1U Stable
L. Holm / K. Jensen
Kemira Oyj
BBBStable
Wr
Recomm.
MARKETWEIGHT
OVERWEIGHT
OVERWEIGHT
MARKETWEIGHT
UNDERWEIGHT
MARKETWEIGHT
MARKETWEIGHT
OVERWEIGHT
OVERWEIGHT
OVERWEIGHT
OVERWEIGHT
39
Company
Kesko Oyj
Klaveness Ship Holding As
Loomis Ab
Luossavaara-Kiirunavaara Ab
Meda Ab
Metsa Board Oyj
Metso Oyj
Ncc Ab
Neste Oyj
Nibe Industrier Ab
Nokia Oyj
Nokian Renkaat Oyj
Nordax Bank Ab
Nordea Bank Ab
North Atlantic Drilling Ltd
Norwegian Air Shuttle Asa
Norwegian Property Asa
Nykredit Bank A/S
Nynas Group
Ocean Rig Udw Inc
Ocean Yield Asa
Odfjell Se
Olav Thon Eiendomsselskap Asa
Olympic Ship As
Orava Residential Reit Plc
Orkla Asa
Outokumpu Oyj
Pacific Drilling Sa
Petroleum Geo Services
Pohjola Bank Oyj
Posten Norge As
Postnord Ab
Recomm.
Danske Bank
S&P
Moody's
Fitch
Analyst(s)
BBB
Stable
BBStable
B+
BBBStable
BBB+
Neg
BBStable
BB
Stable
Ba2
Stable
OVERWEIGHT
BBB
Stable
Baa2
Stable
MARKETWEIGHT
BBBStable
BBBStable
OVERWEIGHT
BBBStable
BB+
Pos
Ba2
Stable
BB
Pos
MARKETWEIGHT
BBB+ Stable
J. Magnussen / M. Rosendal
BBBStable
L. Holm / K. Jensen
AANeg
Aa3
Stable
AAStable
L. Holm / K. Jensen
UNDERWEIGHT
B+
Neg
B
BBNeg
B+
BBBStable
A
Neg
Baa3U Stable
A
Stable
L. Holm / K. Jensen
OVERWEIGHT
B+
Stable
B+
BStable
Caa3
Neg
BB
BBØ. Mossige
B+
Stable
B
BBB+ Stable
B+
Stable
B
B+
Stable
B+
BBB+
Pos
B
Neg
B
Neg
Caa2
Neg
B+
Neg
B1
Neg
I. Båtvik
AANeg
Aa3
Stable
A+
Stable
L. Holm / K. Jensen
MARKETWEIGHT
AStable
BBB+ Stable
40
Danske Bank
S&P
Moody's
Fitch
Analyst(s)
Company
Prosafe Se
BB
Stable
BBS. Stormyr / B.K. Røed
Ramirent Oyj
BB+
Stable
Rem Offshore
BNeg
Sandnes Sparebank
BBB+ Stable
L. Holm / K. Jensen
Sandvik Ab
BBB
Neg
Sas Ab
BStable
Wr
Stable
Sbab Bank Ab
A
Neg
A2
Stable
L. Holm / K. Jensen
Scania Ab
AM. Rosendal / B. Børsting
Schibsted Asa
BBB
Stable
Seadrill Ltd
BBStable
B+
Securitas Ab
BBB
Pos
Wr
Siem Offshore
BNeg
Skandinaviska Enskilda Banken Ab
A+
Neg
Aa3
Stable
A+
Pos
L. Holm / K. Jensen
Skanska Ab
BBB+ Stable
Skf Ab
BBB
Stable
Baa1
Neg
Sognekraft As
BBB
Stable
BBB
Solstad Offshore Asa
BBStable
B+
Spar Nord Bank A/S
BBB+ Stable
L. Holm / K. Jensen
Sparebank 1 Boligkreditt As
AStable
L. Holm / K. Jensen
Sparebank 1 Nord Norge
A1
Stable
A
Stable
L. Holm / K. Jensen
Sparebank 1 Smn
A1
Stable
AStable
L. Holm / K. Jensen
Sparebank 1 Sr-Bank Asa
A1
Stable
AStable
L. Holm / K. Jensen
Sponda Oyj
BBBStable
Ssab Ab
BBStable
St1 Nordic Oy
BB
Stable
Statkraft Sf
AStable
Aaa
Stable
Statnett Sf
A+
Stable
Wr
Stable
Statoil Asa
AANeg
Aa2
Stable
Steen & Strom As
BBB+ Stable
Stena Ab
BB
Stable
B2
Stable
Stockmann Oyj Abp
B+
Stable
Stolt-Nielsen Ltd
BB+
Stable
BB
Recomm.
MARKETWEIGHT
MARKETWEIGHT
UNDERWEIGHT
MARKETWEIGHT
OVERWEIGHT
UNDERWEIGHT
UNDERWEIGHT
MARKETWEIGHT
UNDERWEIGHT
UNDERWEIGHT
OVERWEIGHT
MARKETWEIGHT
UNDERWEIGHT
UNDERWEIGHT
41
Company
Stora Enso Oyj
Storebrand Bank Asa
Storebrand Livsforsikring As
Sunnfjord Energi As
Suomen Hypoteekkiyhdistys
Svensk Fastighetsfinansiering Ab
Svenska Cellulosa Ab Sca
Svenska Handelsbanken Ab
Swedavia Ab
Swedbank Ab
Swedish Match Ab
Sydbank A/S
Saab Ab
Tallink Grupp As
Tdc A/S
Technopolis Oyj
Teekay Lng Partners Lp
Teekay Offshore Partners Lp
Tele2 Ab
Telefonaktiebolaget Lm Ericsson
Telenor Asa
Teliasonera Ab
Teollisuuden Voima Oyj
Thon Holding As
Tine Sa
Upm-Kymmene Oyj
Vasakronan Ab
Vattenfall Ab
Vestas Wind Systems A/S
Victoria Park Ab
Volvo Ab
Wihlborgs Fastigheter Ab
Danske Bank
S&P
Moody's
Fitch
BB
Stable
Ba2
Stable
WD
BBB+ Stable
BBB+
Neg
Nr
Stable
BBB+ Stable
Baa1
Stable
BBBStable
BBBBBB
Neg
BBB
Stable
AStable
Baa1
Stable
AANeg
Aa2
Stable
AAStable
AStable
A+
Stable
Aa3
Stable
A+
Pos
BBB
Stable
Baa2
Stable
Baa1
Stable
BBB+ Stable
Wr
BB
Stable
BBBBB
Neg
Baa3
Stable
BBB
Neg
BB+
Stable
BB
BB
Stable
BBBBStable
B+
BBB
Stable
BBB+ Stable
Baa1
Stable BBB+ Stable
A
Stable
A3
Stable
AStable
A3
Neg
AStable
BBBNeg
Wr
BBB
Stable
BBB+ Stable
BBB+ Stable
BB+
Stable
Ba1
Stable
WD
AStable
BBB+
Neg
A3
Neg
ANeg
BBBBBStable
B+
BBB
Stable
Baa2
Stable
BBB
Stable
BB+
Stable
BB
Analyst(s)
Recomm.
MARKETWEIGHT
L. Holm / K. Jensen
L. Holm / K. Jensen
L. Holm / K. Jensen
Louis Landeman
MARKETWEIGHT
L. Holm / K. Jensen
MARKETWEIGHT
L. Holm / K. Jensen
MARKETWEIGHT
MARKETWEIGHT
L. Holm / K. Jensen
OVERWEIGHT
N. Ripa / J. Magnussen
MARKETWEIGHT
Ø. Mossige
Ø. Mossige
MARKETWEIGHT
MARKETWEIGHT
UNDERWEIGHT
OVERWEIGHT
MARKET WEIGHT
UNDERWEIGHT
N. Ripa / J. Magnussen
OVERWEIGHT
MARKETWEIGHT
Source: Standard & Poor's, Moody's, Fitch, Danske Bank Markets
42
Fixed Income Credit Research team
Thomas Hovard, Chief Analyst
Head of Credit Research
+45 45 12 85 05
hova@danskebank.com
Brian Børsting, Senior Analyst
Industrials
+45 45 12 85 19
brbr@danskebank.com
Ola Heldal, Senior Analyst
TMT
+47 85 40 84 33
olh@danskebank.com
Louis Landeman, Senior Analyst
TMT, Industrials
+46 8 568 80524
llan@danskebank.com
Lars Holm, Senior Analyst
Financials
+45 45 12 80 41
laho@danskebank.com
Sondre Dale Stormyr, Senior Analyst
Offshore Rigs
+47 85 40 70 70
sost@danskebank.com
Mads Rosendal, Analyst
Industrials, Pulp & Paper
+45 45 14 88 79
madro@danskebank.com
Gabriel Bergin, Analyst
Strategy, Industrials
+46 8 568 80602
gabe@danskebank.com
Henrik René Andresen, Senior Analyst
Credit Portfolios
+45 45 13 33 27
hena@danskebank.com
Jakob Magnussen, Senior Analyst
Utilities, Energy
+45 45 12 85 03
jakja@danskebank.com
Niklas Ripa, Senior Analyst
High Yield, Industrials
+45 45 12 80 47
niri@danskebank.com
Øyvind Mossige, Senior Analyst
Oil Services
+47 85 40 54 91
omss@danskebank.com
Knut-Ivar Bakken, Senior Analyst
Fish Farming
+47 85 40 70 74
knb@danskebank.com
Bjørn Kristian Røed, Senior Analyst
Shipping
+47 85 40 70 72
bred@danskebank.com
Emil Hjalmarsson, Analyst
Real Estate, Construction
+46 8 568 80634
emih@danskebank.com
Katrine Jensen, Analyst
Financials
+45 45 12 80 56
katri@danskebank.com
Iver Christian Båtvik, Analyst
Shipping
+47 95 97 74 45
ibt@danskebank.com
Haseeb Syed
High Yield, Norway
+47 85 40 54 19
hsy@danskebank.com
43
Disclosures
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ('Danske Bank'). The authors of this research report
are Mads Rosendal, Senior Analyst, and Katrine Jensen, Analyst.
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the
research analyst's personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further
certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations
expressed in the research report.
Regulation
Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the
relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority
and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation
Authority are available from Danske Bank on request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts' rules of ethics and the
recommendations of the Danish Securities Dealers Association.
Conflicts of interest
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research
objectivity and independence. These procedures are documented in Danske Bank's research policies. Employees within Danske Bank's Research
Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research
Management and the Compliance Department. Danske Bank's Research Departments are organised independently from and do not report to other
business areas within Danske Bank.
Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not
receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions.
Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment
management, investment banking, custody and other financial services activities, may be a lender to the companies mentioned in this publication and
have whatever rights are available to a creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its
affiliates and subsidiaries may have credit or other information regarding the companies mentioned in this publication that is not available to or may not
be used by the personnel responsible for the preparation of this report, which might affect the analysis and opinions expressed in this research report.
See http://www-2.danskebank.com/Link/researchdisclaimer for further disclosures and information.
44
General disclaimer
This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or
form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e.
financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect
to any such financial instruments) ('Relevant Financial Instruments').
The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While
reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske
Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from
reliance on this research report.
The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These
opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes
related to the information provided in this research report.
This research report is not intended for retail customers in the United Kingdom or the United States.
This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any
recipient for any purpose without Danske Bank's prior written consent.
Disclaimer related to distribution in the United States
This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule
15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely
to 'U.S. institutional investors' as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the
United States solely to 'U.S. institutional investors'.
Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research
analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA but satisfy the
applicable requirements of a non-U.S. jurisdiction.
Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets
Inc. directly and should be aware that investing in non-U.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be
registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange
Commission.

Weekly Credit Update

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