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MOODYS.COM
30 JULY 2015
NEWS & ANALYSIS Corporates 2 Teva Will Triple Debt to Buy
Allergan's Generics Business Pearson's Sale of FT Group to Nikkei
Is Credit Positive UK Bookmaker Ladbrokes' Merger with Gala Coral
Is
Credit Positive
Infrastructure 6 Energy Future Holdings Bankruptcy Disclosure
Statement Is
Credit Negative for Oncor Korea's Nuclear Reactor Commissioning
Is Credit Positive for
KHNP and KEPCO
Banks 9 Higher Deposit Rates for Argentine Banks Will Narrow
Interest
Margins, a Credit Negative Australian Major Banks Repricing of
Residential Investor Loans
Is Credit Positive
Insurers 14 Meiji Yasuda's Acquisition of US-Based StanCorp
Benefits StanCorp
Sovereigns 16 Korea's Supplementary Budget Aims to Bolster
Growth and
Maintain Fiscal Prudence, a Credit Positive The Unfolding
Collapse in Macao's Economy Is a Credit
Negative
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NEWS & ANALYSIS Credit implications of current events
2 MOODYS CREDIT OUTLOOK 30 JULY 2015
Corporates
Teva Will Triple Debt to Buy Allergans Generics Business Teva
Pharmaceutical Industries Ltd. (Baa1 review for downgrade) on
Monday announced plans to buy the North American generic and
international businesses of Allergan Plc (unrated1) for $40.5
billion in cash and equity. The deal, which Teva will fund with $27
billion of new debt, is credit negative for Teva because it will
significantly increase its financial leverage. For Allergan, the
deal will reduce its scale and diversity, which we typically view
as credit negative, but this will be mitigated by the receipt of
$36 billion of net proceeds, which will significantly strengthen
Allergans balance sheet.
Following the deals announcement, we downgraded Tevas A3 rating
to Baa1, and its ratings remain on review for downgrade. We also
affirmed Allergan subsidiaries Baa3 ratings and stable
outlooks.
To pursue Allergan, Teva abandoned its hostile effort to buy
another generics company, Mylan Inc. (Baa3 developing), for $46.5
billion, including the assumption of $6.5 billion of Mylans debt.
Although the Allergan deal carries less execution risk, it carries
a higher purchase multiple and offers fewer operating synergies.
Teva is paying 17x trailing 12-month EBITDA for Allergans generics
business before accounting for synergies (10.8x including Tevas
expectation of $1.4 billion of synergies). This compares with Tevas
bid of 15.5x EBITDA for Mylan (9.3x including $2 billion of
expected synergies).
The Allergan deal will raise Tevas total debt to about $38
billion from $11 billion and its debt/EBITDA to 4.6x (or 4.0x
including synergies) from about 2.0x (based on trailing 12-month
EBITDA). The Mylan deal would have resulted in pro forma leverage
of about 4.4x (or 3.6x with synergies).
However, the Allergan deal will be less disruptive to Teva than
a hostile bid for Mylan, which would have been a protracted
distraction and would result in a difficult integration. Both Tevas
and Allergans boards already approved the transaction and Sigurder
Olafsson, head of Tevas generics business, is the former head of
Allergans generic business. Furthermore, Teva-Allergan has fewer
significant overlapping assets than Teva-Mylan, so antitrust
regulators are likely to require fewer significant
divestitures.
The Allergan deal solidifies Tevas leadership position in the
generics industry. With pro forma generic drug revenue of about
$16.7 billion, Teva will be almost twice as large as its closest
competitor, Novartis AGs (Aa3 stable) Sandoz unit. Allergan will
also provide Teva with economies of scale and improve its
manufacturing capacity. Scale is increasingly critical for generic
drug makers as their customers, drug wholesalers and retailers,
consolidate their purchasing power in order to gain negotiating
leverage and put pricing pressure on generic manufacturers.
The Allergan assets will reduce Tevas reliance on Copaxone, an
injectable drug for multiple sclerosis, which in 2014 contributed
approximately 21% of total revenue and nearly half of operating
profits. Sandoz and its partner Momenta (unrated) launched a
generic version of Copaxone in June. As a result, Tevas standalone
growth prospects for the next two years are relatively modest,
because declines in Copaxone will be a drag on overall profits.
Following the close of the deal, we estimate that Copaxone will
contribute less than 15% of pro forma revenues and less than one
third of operating profits.
1 Allergan subsidiaries, including Actavis Funding SCS, Actavis
Inc., and Allegan Inc. are rated Baa3 stable.
Jessica Gladstone, CFA Senior Vice President +1.212.553.2988
[email protected]
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 www.moodys.com for the
most updated credit rating action information and rating
history.
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NEWS & ANALYSIS Credit implications of current events
3 MOODYS CREDIT OUTLOOK 30 JULY 2015
For Allergan, the divestiture is a complete about-face because
the company repeatedly had said that it would not sell the
business. The generic business has lower profit margins than
Allergans branded business, but it affords the company scale and
diversity, which it will now forego, along with about $2.4 billion
of annual EBITDA.
However, the $36 billion of net after-tax cash proceeds from the
sale will strengthen the companys balance sheet and give the
company the opportunity to reduce its leverage through debt
repayment or acquisitions that grow EBITDA. How much debt Allergan
will repay with the proceeds is uncertain, but Allergan has stated
that it is committed to maintaining an investment-grade rating. We
estimate around $8 billion of pro forma EBITDA following the
divestiture. The company in the past has stated a goal of reducing
leverage to around 3.5x, which would translate to debt repayment of
roughly $16 billion (current debt is around $44 billion). That
said, Allergan very well may pursue additional acquisitions,
deleveraging through enhancing its earnings instead, and therefore
may end up repaying significantly less debt than that estimate.
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NEWS & ANALYSIS Credit implications of current events
4 MOODYS CREDIT OUTLOOK 30 JULY 2015
Pearsons Sale of FT Group to Nikkei Is Credit Positive Last
Thursday, Pearson plc (Baa1 negative) announced that it had agreed
to sell the FT Group to Nikkei Inc. (unrated) for a gross
consideration of 844 million. The FT Group sale, which includes the
London-based Financial Times, is credit positive for Pearson
because it helps boost cash amid a challenging operating
environment that has contributed to a significant deterioration in
Pearsons credit metrics. We view the sale as part of the
transformation of Pearsons business away from traditional
journalism, and expect sale proceeds to facilitate investment in
education businesses that have higher return potential.
Our credit-positive view of the FT Group sale is based on the
expectation that Pearson will apply the proceeds in a fashion that
strengthens the company through business investments or actions to
reduce financial risk, such as debt reduction. Using the proceeds
for bolt-on acquisitions with stronger growth and operating margin
potential in emerging markets or in the digital space in the
education sector would likely reduce Pearsons business risk.
Pearson will be receiving 694 million of net disposal proceeds
after deducting the 90 million contribution that Pearson will make
to the group pension plan following the transactions close and a
tax deduction on disposal of approximately 60 million.
The sale of FT Group comes at a strong valuation of around 35x
2014 earnings. Pearson will not lose much scale with the sale
because the FT Group contributed only 334 million in sales in 2014
(around 7% of Pearsons total 2014 revenues) and 24 million in
adjusted operating income (only 3% of Pearsons total 2014 adjusted
operating profit, including Penguin Random House, which, using the
equity method, is accounted for as 47%-owned by Pearson).
We regard the disposal of FT Group as part of a broad
repositioning of Pearsons business toward education. Pearson has
been disposing of other non-core assets, selling its PowerSchool
business, a leading provider of K-12 student information systems in
North America, for $350 million in June 2015. On 25 July, Pearson
confirmed that it is in discussions with the Economist Groups board
and trustees regarding the potential sale of its 50% stake in that
company.
However, Pearson has struggled over the past two years because
education textbook sales and university enrolments in North America
have been declining. The company pursued a significant
restructuring in 2013 and 2014 to boost investment in digital
services and emerging markets. The cash proceeds from FT Groups
disposal should help Pearson invest in growth initiatives such as
bolt-on acquisitions with good growth potential and de-leveraging
its balance sheet.
In its first-half 2015 results, Pearson confirmed that it
expected the cyclical and policy-related factors that have hindered
growth in its education businesses to stabilize during the rest of
2015.
The negative outlook on Pearsons Baa1 rating considers the need
for further stabilisation in its key education markets and
consistent execution of the companys operating plan to restore
credit metrics to levels that are more supportive of the rating. To
be adequately positioned within the Baa1 rating, we would expect
Pearson to maintain a Moodys-adjusted retained cash flow/net debt
ratio at least in the high teens, versus 14.3% in 2014, and an
adjusted gross debt/EBITDA ratio of less than 3.0x, versus 3.5x at
the end of 2014.
Gunjan Dixit Vice President - Senior Analyst +44.20.7772.8628
[email protected]
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NEWS & ANALYSIS Credit implications of current events
5 MOODYS CREDIT OUTLOOK 30 JULY 2015
UK Bookmaker Ladbrokes Merger with Gala Coral Is Credit Positive
Last Friday, UK bookmakers Ladbrokes Plc (Ba2 stable) and Gala
Coral Group Limited, parent of Gala Electric Casinos Plc (B2
stable), agreed to merge Ladbrokes with Corals betting businesses,
creating a group with a pro forma market capitalisation of 2.3
billion.
The merger, which is subject to approval by Ladbrokes
shareholders and regulator, is credit positive because of the
combined entitys increased size, its more balanced product offering
and wider geographic reach. Ladbrokes Coral will become the UKs
largest owner of betting shops and the third-largest operator in
online gaming.
Ladbrokes Coral will issue new shares to Gala Coral at the
completion of the merger, which includes Coral Retail, Eurobet
Italy and Corals Online division.
The combined company will have revenues of 2.2 billion and
EBITDA of 390 million before exceptional items, based on the 12
months ended 30 June 2015 for Ladbrokes and 11 April 2015 for
Coral, compared with revenues of 1.2 billion and EBITDA of 187
million for Ladbrokes on its own. The merged company will
strengthen its share of the UK market with 4,000 betting shops,
compared with Ladbrokes approximately 2,200 shops before the
merger. It will also overtake current market leader William Hill
Plc (Ba1 positive), which has around 2,300 betting shops.
The merged company will also slightly reduce its share of
overall revenues from the mature UK retail gaming segment and
improve its presence online. Furthermore, Ladbrokes will gain
access to the Italian market with Corals current land-base and
online-operation presence.
The increased scale will result in greater marketing
capabilities and economies of scale. The management team has
estimated annual synergies of at least 65 million to be fully
realised in the next three years by efficiency savings and
renegotiating supplier contracts (e.g., with software supplier
Playtech). However, the estimated cost savings are only a small
fraction (4%-5%) of the combined cost base.
Ladbrokes also announced a three-year strategic plan, including
the issuance of 92 million shares and dividend cuts to support
investment in its retail and digital divisions and Australian
operations and to strengthen its balance sheet. The credit-positive
plan, which is independent of the Coral deal, addresses the
divisions whose performance lags those of peers without
compromising cash flow generation.
Notwithstanding the strategic benefits, the transaction will
weaken Ladbrokes capital structure, increasing the companys net
reported debt to approximately 1.3 billion from 414 million
currently. Our Moodys-adjusted leverage, as measured by
debt/EBITDA, will likely rise to more than 4x upon completion of
the deal from 3.5x in 2014, which we expect in the first half of
2016. However, we expect the company to maintain a strict financial
policy and to gradually reduce leverage, aided by the realisation
of cost synergies.
Ladbrokes Coral also faces execution and regulatory risks.
Combining the two companies could take longer and cost more than
management expects owing to the size and complexity of the
operations. Although the companies plan to keep both the Coral and
Ladbrokes brands in the UK, we expect that there will be some
customer loss, particularly in the digital division. Because of the
merged companys market-leading position in UK retail gaming, the
regulator, the Competition and Markets Authority, is likely to look
closely at the deal and may require the sale of some betting
shops.
Donatella Maso Vice President - Senior Analyst +44.20.7772.5244
[email protected]
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NEWS & ANALYSIS Credit implications of current events
6 MOODYS CREDIT OUTLOOK 30 JULY 2015
Infrastructure
Energy Future Holdings Bankruptcy Disclosure Statement Is Credit
Negative for Oncor Last Thursday, Energy Future Holdings Corp.
(EFH, unrated) filed an amended disclosure statement with the US
Bankruptcy Court that spells out EFHs preferred path for emerging
from bankruptcy. The preferred path is credit negative for EFHs
80%-owned regulated transmission and distribution utility, Oncor
Electric Delivery Company LLC (Baa1 positive). We see three
credit-negative risks in the disclosure statement: Oncors
conversion to a real estate investment trust (REIT), dismantling of
ring-fence provisions and higher leverage across the corporate
family.
EFH plans to convert Oncor into a REIT, which will increase the
risk of regulatory contentiousness during the Public Utility
Commission of Texas (PUCT) approval process for the
change-in-control and for future rate cases. A REIT structure would
allow the new owner of the utility assets to reduce its tax
obligations, potentially creating a disconnect between the reduced
tax obligation at the corporate level as a REIT and the rate
collected from the ratepayers to cover the higher tax obligation as
an electric utility corporation.
Unless authorized rates are modified to reflect the tax
efficiencies associated with REITs, we expect customers to become
intolerant of rate increase requests, which would build pressure at
both the political and regulatory levels to reduce rates. As a
result, we believe that the PUCT, which regulates Texas electric
rates, would likely address the disconnect through regulatory
measures. For example, the PUCT might restrict upstream dividend
payments or lower Oncors 10.25% authorized return on equity, which
is already higher than its Texas electric transmission and
distribution peers, to factor in the tax savings of the REIT
structure.
We also see a material dismantling of the strong suite of
ring-fence provisions that helped insulate Oncor from its
financially distressed parent and affiliate. The disclosure plan
contemplates removing Oncors minority investors, including the
Canadian pension manager Borelias Infrastructure. Borelias presence
at Oncor, combined with the special corporate governance rights
provided to it, was a principal element in our analysis of how well
Oncor would be insulated from its parents bankruptcy. The
disclosure statement reminds us that minority investors can help
reduce the probability of a default, but have very little influence
with respect to expected losses. However, we see Borealis as a
formidable minority investor that will vigorously defend its
rights, which will help to keep Oncors existing ring-fence
provisions in place.
The third principal risk is the leverage across the family. We
estimate that $12 billion of capital will sit above Oncor at its
parent holding company, in addition to its roughly $7.5 billion of
debt. Regardless of whether it is legally liable or not, Oncor will
need to service the financing costs associated with that capital
since it is the only entity within the corporate family that
generates any earnings or cash flow. EFH expects that the capital
will be a mix of debt and equity, but it is difficult to see at
this time what the split would be. We also see an added regulatory
risk in the sense that the preferred path for bankruptcy, coupled
with the $12 billion of capital, is designed to help facilitate
recovery at Oncors affiliate, Texas Competitive Energy Holdings
Company LLC, the unregulated generation segment of EFH.
The plot will thicken over the next few weeks as additional
information comes to light with respect to the terms and conditions
being sought by the debtors and creditors. We expect the bankruptcy
court to review the disclosure statement on 18 August.
Jairo Chung Analyst +1.212.553.5123 [email protected]
Jim Hempstead Associate Managing Director +1.212.553.4318
[email protected]
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NEWS & ANALYSIS Credit implications of current events
7 MOODYS CREDIT OUTLOOK 30 JULY 2015
Koreas Nuclear Reactor Commissioning Is Credit Positive for KHNP
and KEPCO Last Friday, Korea Hydro and Nuclear Power Company
Limited (KHNP, Aa3 positive), the wholly owned nuclear power
generation subsidiary of Korea Electric Power Corporation (KEPCO,
Aa3 positive), announced that it had commenced the commercial
operations of the Shin-Wolseong 2 nuclear reactor following
approval from Koreas Nuclear Safety and Security Commission.
The commissioning is credit positive for KHNP and KEPCO because
it will strengthen the companies operating cash flow and debt
metrics by boosting KHNPs electricity sales and by reducing KEPCOs
reliance on relatively expensive liquefied natural gas (LNG) or
oil-fueled power plants.
With 1,000 megawatts of capacity, the new reactor will generate
7,900 gigawatt-hours per year, according to KHNP. The gain will
increase KHNPs funds from operations (FFO) by KRW300-KRW400 billion
annually, and support its credit metrics against sizable capital
expenditures to build new plants. With this already reflected in
our base case, we expect KHNPs FFO/debt to be 23%-28% over the next
12-18 months, down slightly from 31% in 2014.
For KEPCO, the additional baseload generation will help reduce
its overall generation costs, including the costs of purchasing
electricity from independent power producers, which is mostly
LNG-fueled and therefore costlier than electricity from nuclear or
coal plants. We expect such incremental savings to boost the
utilitys FFO by KRW500-KRW600 billion annually, which, together
with a significant decline in fuel costs, will strengthen its
credit metrics. We expect KEPCOs FFO/debt to improve to 20%-23%
over the same period from 18% in 2014 (see Exhibit 1).
EXHIBIT 1
KEPCO Funds from Operations/Debt Lower costs of power purchase
and fuel costs will support continued improvement of KEPCOs cash
flow.
Sources: Moodys Financial Metrics and Moodys Investors Service
forecast
Significantly, the commencement of Shin-Wolseong 2s operations
marks the first commissioning of a new reactor in Korea since the
discovery of substandard parts in some reactors in 2013, which led
to lengthy inspections and temporary shutdowns of several reactors.
As such, the start-up of Shin-Wolseong 2 demonstrates the Korean
governments (Aa3 positive) continued support for nuclear energy and
sets a positive precedent for start-up approvals over the next
three years of KHNPs four other reactors that are currently under
construction. These reactors, Shin-Kori 3 and 4 and Shin-Hanul 1
and 2, have a combined capacity of 5,600 megawatts and, if
commissioned as scheduled, would augment the nations nuclear
capacity by 26% by 2018 (see Exhibit 2).
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
2011 2012 2013 2014 2015-2016(F) Average
Sean Hwang Associate Analyst +852.3758.1587
[email protected]
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NEWS & ANALYSIS Credit implications of current events
8 MOODYS CREDIT OUTLOOK 30 JULY 2015
EXHIBIT 2
KHNP Aims to Add 5,600 Megawatts of Nuclear Capacity by 2018
Source: Korea Ministry of Trade, Infrastructure and Energy
In the Seventh Basic Plan for Long-Term Electricity Supply and
Demand, approved by the National Assembly on 21 July, the
government outlined its goal to nearly double KHNPs nuclear
capacity to 38,329 megawatts by 2029 from 20,716 at year-end 2014.
To achieve this target, KHNP plans to add 12 more reactors,
including the four Shin-Kori and Shin-Hanul units, over the next 15
years.
0
5,000
10,000
15,000
20,000
25,000
30,000
2014 2015 2016 2017 2018
Gen
erat
ion
Capa
city
(MW
)
Existing Nuclear Capacity at Year-End 2014 Shin-Wolseong 2
Shin-Kori 3 Shin-Kori 4 Shin-Hanul 1 Shin-Hanul 2
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NEWS & ANALYSIS Credit implications of current events
9 MOODYS CREDIT OUTLOOK 30 JULY 2015
Banks
Higher Deposit Rates for Argentine Banks Will Narrow Interest
Margins, a Credit Negative Last Thursday, the Argentine central
bank expanded existing regulations that require banks to pay
minimum rates for deposits, which will drive further increases in
funding costs. The new rules raise the minimum rates set in October
2014, and apply them to a greater share of bank deposits.
The minimum deposit rates will now be applied to the first ARS1
million ($109,000) of deposits in each account, significantly
higher than the previous ARS350,000 threshold. These higher funding
costs will further narrow banks interest margins, which are already
negatively pressured by Argentinas weak economy.
The regulation aims to encourage Argentine peso savings, while
simultaneously reducing pressure on the exchange rate in the
unofficial market, where Argentines go when they are unable to
obtain foreign currencies at the more favorable government official
exchange rate. Market participants have been buying dollars to
protect their savings against Argentinas high inflation rate, which
is officially calculated at an annualized rate of 13.9% and
unofficially at 25%-30%, and to guard against a further devaluation
of the currency. Recently, uncertainty about the outcome of
presidential election primaries scheduled for 9 August has
increased demand for dollars in the unofficial market.
The minimum interest rates first set in October 2014 were 400
basis points higher than market rates at that time. The latest
regulation published last Thursday will require banks to increase
their deposit rates by an additional 100-300 basis points depending
on the tenor and the amount of the term deposit. Consequently,
banks will now have to pay up to 26.1% on deposits that are subject
to the government-mandated interest rate floors (see Exhibit
1).
EXHIBIT 1
Argentine Government-Mandated Interest Rates Tenor of Deposit
New Minimum Rates Previous Minimum Rates
30-44 days 23.6% 22.6%
45-59 days 24.1% 23.1%
60-89 days 25.1% 24.1%
90-119 days 25.6% 24.1%
120-179 days 25.9% 24.1%
180 days and longer 26.1% 24.1%
Note: These rates apply to deposit amounts of up to ARS1
million. Source: Banco Central de la Repblica Argentina
Banks will continue to benefit from access to current accounts,
which do not pay interest and account for 30% of total funding, and
saving accounts, which account for 22% of total funding, and have a
relatively low average cost of 0.20%. However, the minimum deposit
rates will now apply to almost 20% of total deposits in the system,
up from 13% currently (see Exhibit 2). We expect that the new rates
will require banks to spend about ARS2 billion more on deposits a
year, roughly a 2% increase in funding costs across the banking
system.
Fernando Albano, CFA Assistant Vice President - Analyst
+54.11.5129.2624 [email protected]
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NEWS & ANALYSIS Credit implications of current events
10 MOODYS CREDIT OUTLOOK 30 JULY 2015
EXHIBIT 2
Argentine Bank Deposits by Type and Amount New minimum interest
rates on term deposits will apply to 20% of total deposits.
Source: Banco Central de la Repblica Argentina
In addition to deposit rate floors, banks interest margins have
also narrowed because of lending rate caps on pledge loans,
personal loans and credit card loans in place since 2014, as well
as the central bank mandate in place since 2012 that banks every
six months lend an amount equal to a percentage of their total
private sector peso-denominated deposits. The central bank
increased the percentage of deposits to 7.5% in June 2015 from
6.5%. The lending must be made at a capped rate that has been
300-500 basis points lower than the average rate banks have to pay
for term deposits, and up to 810 basis points below the
government-mandated minimum rate for deposits of less than ARS1
million with tenors greater than 180 days, creating a significant
drag on earnings.
Argentine private banks earned a 28% average annualized return
on equity in nominal terms in the first quarter of this year,
despite these rate floors and caps and lending mandates. However,
when adjusted for inflation, which private-sector estimates peg at
25%-30% over the same period, profitability was around zero.
Moreover, profitability will face further pressure as banks
continue to increase their holdings of liquid assets such as
central bank bills, which yield negative real interest rates, and
slow their loan growth in response to concerns about the effect of
the countrys weakening economy on borrowers creditworthiness.
Term Deposits Lower than ARS350K (Minimum Rates Since October
2014)13%
Term Deposits Between ARS350K and ARS1M (New Minimum
Rates)7%
Term Deposits Higher than ARS1M (Rate Not Regulated)28%
Current Accounts (No Cost)30%
Savings Accounts (Average Cost 0.2%)22%
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NEWS & ANALYSIS Credit implications of current events
11 MOODYS CREDIT OUTLOOK 30 JULY 2015
Australian Major Banks Repricing of Residential Investor Loans
Is Credit Positive Over the past week, three major Australian banks
increased their lending rates for residential property investment
loans and interest-only (IO) loans. Australia and New Zealand
Banking Group Limited (ANZ, Aa2/Aa2 stable, a12) and Commonwealth
Bank of Australia (CBA, Aa2/Aa2 stable, a1) each lifted the
standard variable investor rate by 0.27%. National Australia Bank
Limited (NAB, Aa2/Aa2 stable, a1) increased the rate it charges for
IO loans and line of credit facilities by 0.29% (investors, rather
than owner-occupiers, primarily take out IO loans).
Increased lending rates are credit positive for the banks
because they rebalance their portfolios away from the higher-risk
investor and IO lending toward safer owner-occupied and principal
amortizing loans. They also help to preserve net interest margins
(NIM) and profitability amid higher capital requirements and
increased competition from smaller lenders.
The banks moves follow increasing regulatory scrutiny of
residential property lending. Investment and IO lending has grown
rapidly in the recent past, reaching a record proportion of overall
mortgage lending (see Exhibit 1) that has contributed to rapid
house price appreciation, particularly in the Sydney and Melbourne
markets.
EXHIBIT 1
Australian Major Banks Proportion of Higher-Risk Mortgage
Lending as a Percentage of Housing Loans Written
Source: Australian Prudential Regulation Authority
In December 2014, the Australian Prudential Regulation Authority
(APRA) announced a set of measures designed to ensure residential
mortgage underwriting standards remain prudent and to curb growth
in investment lending to 10% per year. The major Australian banks
have since undertaken a number of initiatives to ensure compliance
with APRAs guidelines (see Exhibit 2). Notably, these include the
imposition of higher down payment requirements for investment
lending and these most recent pricing changes.
2 The bank ratings shown in this report are the banks deposit
rating, senior unsecured debt rating and baseline credit
assessment.
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45%
50%
Mar
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08
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Investment Loans IO Loans
Ilya Serov Vice President - Senior Credit Officer
+61.2.9270.8162 [email protected]
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NEWS & ANALYSIS Credit implications of current events
12 MOODYS CREDIT OUTLOOK 30 JULY 2015
EXHIBIT 2
Australian Major Banks Initiatives to Curb Investment
Lending
Changes to Loan-to-Value Caps
Changes to Mortgages Interest Rates Other
Australia and New Zealand Banking Group Limited
90% loan-to-value (LTV) caps for investor loans
Eliminated interest rate discount for new property investors
Increased interest rates for investment loans, cut fixed owner
occupier rates
Commonwealth Bank of Australia
80% LTV caps for investor loans (for the Bankwest brand)
Reduced interest rate discount for new investor borrowers
Increased interest rates for investment loans
Removed AUD1,000 rebate for new investor borrowers
National Australia Bank Limited
90% LTV caps for investor loans
Increased interest rates for interest-only loans and line of
credit facilities
Discontinued investor lending for self-managed superannuation
funds
Westpac Banking Corporation 80% LTV caps for investor loans
Reduced interest rate discount for new investor borrowers
Stricter lending criteria for "non-resident" home lending,
toughened serviceability test
Source: The companies and media reports
Although investment and IO loans performed well during the
global financial crisis of 2007-10, they inherently carry higher
default probabilities and severities, and a larger proportion of
such loans risks higher delinquencies for Australian banks at times
of stress.
Investment loans typically have higher loan-to-value ratios: our
data indicates that the average loan-to-value ratio for investment
loans is 60.2%, versus 57.8% for owner-occupier loans. In addition,
since the underlying properties are not the primary residence, they
are more sensitive to changes in house prices and borrower
employment status and thus are more likely to default if the
borrowers conditions change. IO loans are more exposed to rising
interest rates than principal-and-interest loans.
We see APRAs and the banks efforts to slow the growth in
investment lending as an important credit support for the system.
We also expect that the remaining major Australian bank, Westpac
Banking Corporation (Aa2/Aa2 stable, a1) will follow the other
banks in repricing its investment mortgage book. Over time, these
steps are likely to slow investment lending growth rates to below
APRAs 10% cap from current annualized growth rates of 10.6% for
ANZ, 9.9% for CBA, 14.1% for NAB and 10.0% for Westpac, according
to APRA data.
Curbing investment lending is particularly positive for those
banks with significant investment loan portfolios. As Exhibit 3
shows, NAB and Westpac, when it follows suit, are especially
well-placed to derive benefits from pricing changes. Westpac has
the highest proportion of investment lending in its portfolio (46%
of total housing loans), exposing it to a higher-risk segment, and
NAB has opted to reprice its IO loans and line of credit facilities
(together they constitute 47% of its overall portfolio), allowing
it to capture a greater NIM benefit.
-
NEWS & ANALYSIS Credit implications of current events
13 MOODYS CREDIT OUTLOOK 30 JULY 2015
EXHIBIT 3
Australian Major Banks Proportion of Investor Loans as a
Percentage of Total Housing Portfolios
Source: The companies
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
ANZ CBA NAB Westpac
Investment Lending IO and Line of Credit Lending
-
NEWS & ANALYSIS Credit implications of current events
14 MOODYS CREDIT OUTLOOK 30 JULY 2015
Insurers
Meiji Yasudas Acquisition of US-Based StanCorp Benefits StanCorp
Last Friday, Meiji Yasuda Life Insurance Company (financial
strength A1 stable) announced that it had acquired all the
outstanding shares of StanCorp Financial Group, Inc. (Baa2 review
for upgrade) for about $5 billion in cash, pending regulatory and
shareholder approval. After the deal announcement, we put StanCorps
debt ratings on review for upgrade and affirmed Meiji Yasudas
rating and the financial strength rating of StanCorps operating
company, Standard Insurance Company (financial strength A2
stable).
StanCorp, a niche writer primarily of disability insurance and
group insurance products, will benefit by becoming part of Meiji
Yasuda, a group and individual life mutual insurer that is Japans
third-largest insurer by premium revenue. Meiji Yasuda has greater
financial resources and stronger credit quality than StanCorp,
reflecting its robust capital and liquidity.
StanCorps credit quality will benefit from its improved access
to capital because we believe that Meiji Yasuda would support
StanCorp in a stressful scenario and StanCorp will have less
pressure to pay dividends to satisfy shareholder demands than it
did as an independent company.
StanCorp has a strong competitive position in US group life
insurance and disability, businesses that have long-tail risk and
earnings volatility. Additionally, StanCorp maintains retirement
and asset management businesses, both of which diversify StanCorps
credit profile. However, the companys profitability and investment
returns are sensitive to economic cycles because of its
concentration in disability insurance, whose performance is
affected by employment trends, and its significant investment
concentration in commercial mortgage loans.
We see more benefits to StanCorps creditors than to its
policyholders because Meiji Yasuda would likely support StanCorps
creditors to protect its $5 billion equity investment in the
company. We affirmed Standards financial strength rating and did
not place it on review for upgrade because Meiji Yasudas A1
financial strength rating is only one notch above Standards, and we
typically do not raise the rating of a supported operating company
to the same level as the entity providing support unless that
support is both explicit and strong. In addition, the following
factors limit the amount of ratings uplift given for parental
support: relative size, ease of separation of subsidiary from
parent, distinct regulatory regions in which the two companies
operate and lack of a demonstrated track record of support at the
outset of the transaction.
With regulatory and shareholder approval, the companies expect
the transaction to close by end of the first quarter of 2016. We
expect StanCorps business strategy and risk profile to remain
essentially unchanged and the current management team and other key
employees to remain in place.
The acquisition is the latest example of a Japanese company
targeting a US niche player to foster its growth (see exhibit),
given stronger market dynamics in the US than in Japan.
Neil Strauss Vice President - Senior Credit Officer
+1.212.553.1934 [email protected]
Eiji Kubo Analyst +81.3.5408.4038 [email protected]
Weigang Bo Associate Analyst +1.212.553.4331
[email protected]
-
NEWS & ANALYSIS Credit implications of current events
15 MOODYS CREDIT OUTLOOK 30 JULY 2015
Recent Acquisitions of US Life Insurers by Japanese
Acquirers
Buyer Rating* Seller Rating* Purchase
Price
Purchase Announcement
Date
Meiji Yasuda Life Insurance Company
A1 stable StanCorp Financial Group, Inc.
A2 stable $5.0 billion July 2015
Tokio Marine Holdings, Inc. Aa3 negative**
HCC Insurance Holdings, Inc. A1 stable $7.5 billion June
2015
Dai-ichi Life Insurance Company, Limited
A1 stable Protective Life Corporation
A2 stable $5.7 billion June 2014
Tokio Marine Holdings, Inc.
Aa2 negative Delphi Financial Group, Inc.
A3 stable $2.7 billion December 2011
* Insurance financial strength rating of lead insurance company
at time of announcement. ** We changed the outlook to negative
immediately subsequent to and owing to the announcement.
Source: Moodys Investors Service
We expect that the Japanese insurance market will shrink owing
to unfavorable demographics, while the US market will continue to
grow. These trends have been behind several acquisitions of US
niche players by major publicly traded Japanese insurers such as
Dai-ichi Life Insurance Company, Limited (financial strength A1
stable), which seek growth overseas to compensate for declining
profits from the Japanese insurance market.
However, this is Meiji Yasudas first large acquisition. Until
now, the company has been very conservative about its foreign
expansion, reflecting its mutuality, its ownership by policyholders
instead of shareholders. In addition, although Dai-ichi and Tokio
Marine & Nichido Fire Insurance Co. (financial strength Aa3
negative) had experience managing small foreign insurers before
their acquisitions of relatively large US insurers, Meiji Yasuda is
less experienced. Despite the challenge of managing foreign
operations, the acquisition gives Meiji Yasuda diversification in
its geographical and product range, and an opportunity to enhance
profits.
-
NEWS & ANALYSIS Credit implications of current events
16 MOODYS CREDIT OUTLOOK 30 JULY 2015
Sovereigns
Koreas Supplementary Budget Aims to Bolster Growth and Maintain
Fiscal Prudence, a Credit Positive On Friday, Koreas National
Assembly approved a KRW11.5 trillion supplementary budget, equal to
about 0.7% of our estimated nominal GDP in 2015. The supplementary
budget is credit positive for Korea (Aa3 positive) because it
supports the governments effort to limit downside risks to economic
growth and does not jeopardize Koreas strong fiscal position.
The supplementary budget is part of a wider set of measures,
which include KRW3.1 trillion in additional Funds spending and
around KRW6.8 trillion of accelerated public and private investment
and government-backed loans. According to Koreas Ministry of
Strategy and Finance (MOSF), the new measures will boost growth by
0.3 percentage points in 2015 and 0.4 percentage points in
2016.
Tepid economic activity over the past year and a half is the
result of domestic and external factors. Both the Sewol ferry
tragedy in April 2014 and the outbreak of Middle East respiratory
syndrome (MERS) in May this year dented consumer and business
sentiment and led the Bank of Korea (BoK) to cut its policy rate to
a historic low of 1.50% in June. Economic growth has also suffered
from the lack of a strong boost in exports, owing to lackluster
external demand. In the second quarter, real GDP grew only 2.2%
from the previous year, the slowest pace in two years.
The supplementary budget focuses on alleviating distress for
domestic sectors, but also complements measures outlined in the
regular budget, which focused on eliminating wasteful spending and
investing in industries that will contribute to the countrys
long-term economic dynamism and growth. For instance, MERS and
drought-related support measures are predominantly aimed at
alleviating the short-term effect on sectors such as medical
services, tourism and agriculture. But the supplementary budget
also includes around KRW17 billion for staffing daycare centers
with more teachers, underlining the governments policy to boost
female labor force participation, and adds KRW1.2 trillion in
support for low-income groups (see Exhibit 1).
Steffen Dyck Vice President - Senior Analyst +49.69.7073.0942
[email protected]
Shirin Mohammadi Associate Analyst +1.212.553.3256
[email protected]
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NEWS & ANALYSIS Credit implications of current events
17 MOODYS CREDIT OUTLOOK 30 JULY 2015
EXHIBIT 1
Koreas Supplementary Budget Details
2014 Budget 2015 Budget Change
Approved Approved
Including Supplementary
Budget
From 2015 Approved
Budget
From 2014
Budget
From 2014
Budget
KRW Trillion KRW Trillion KRW Trillion KRW Trillion KRW Trillion
Percent
(A) (B) (C) (C B) (C A) (C/A - 1)
Total Expenditures 355.8 375.4 384.7 9.3 28.9 8.1%
Welfare, employment 106.4 115.7 116.9 1.2 10.5 9.9%
Education 50.7 52.9 52.9 -- 2.2 4.3%
(excluding support for local government) (9.8) (13.5) (13.5) --
(3.7) 37.8%
Culture, sports, tourism 5.4 6.1 6.1 -- 0.7 13.0%
Environment 6.5 6.8 6.8 -- 0.3 4.6%
Research & development 17.8 18.9 18.9 -- 1.1 6.2%
Industry, SMEs, energy 15.4 16.4 16.4 -- 1.0 6.5%
Social overhead capital investment 23.7 24.8 26.5 1.7 2.8
11.8%
Agriculture & forestry, fishery and food 18.7 19.3 20.1 0.8
1.4 7.5%
National defense 35.7 37.5 37.5 -- 1.8 5.0%
Diplomacy, reunification 4.2 4.5 4.5 -- 0.3 7.1%
Public order, safety 15.8 16.9 16.9 -- 1.1 7.0%
Public administration, local governments 57.2 58.0 58.0 -- 0.8
1.4%
(excluding transfers to local governments) (21.6) (23.1) (23.1)
-- (1.5) 6.9%
MERS-related support -- -- 2.5 2.5 2.5 NA
Note: The total expenditure line includes funds spending not
shown in the detail. Sources: Korea Ministry of Strategy and
Finance and Moodys Investors Service calculations
Although the supplementary budget is unlikely to produce much
growth in 2015 (and we recently lowered our growth forecast for
this year to 2.7% from 3.1%), it is important in shoring up
domestic sentiment. As Exhibit 2 shows, consumer sentiment dropped
below the neutral threshold of 100 in June as a result of the MERS
outbreak in the second half of May. The exhibit also shows that
government stimulus measures have a positive effect on sentiment:
following a slowdown in consumption and investment in the wake of
the Sewol ferry tragedy, the government announced a KRW41 trillion
stimulus package in July last year, which led to improvements in
consumer sentiment.
-
NEWS & ANALYSIS Credit implications of current events
18 MOODYS CREDIT OUTLOOK 30 JULY 2015
EXHIBIT 2
Korean Consumer Sentiment and Real GDP Growth
Source: Bank of Korea
At the same time, we do not think the supplementary budget and
additional measures will negatively affect the sovereigns financial
strength. Based on the supplementary budget, the budget balance
would post a deficit of KRW7 trillion, or around 0.5% of our
estimate for 2015 nominal GDP. However, judging from the experience
with supplementary budgets in previous years, the budget balance
will be closer to 0%. For instance, in 2013, the final budget
surplus was 20% higher than under the supplementary budget
projections. In addition, the Korean government maintains a very
strong fiscal position, which is marked by comparatively low
government debt levels of around 36% of GDP and allows for
counter-cyclical policy measures.
2.1%2.7%
3.2% 3.5%3.9%
3.4% 3.3%2.7% 2.5% 2.2%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
94
96
98
100
102
104
106
108
110
Jan-
2013
Feb-
2013
Mar
-201
3
Apr-
2013
May
-201
3
Jun-
2013
Jul-
2013
Aug-
2013
Sep-
2013
Oct
-201
3
Nov
-201
3
Dec
-201
3
Jan-
2014
Feb-
2014
Mar
-201
4
Apr-
2014
May
-201
4
Jun-
2014
Jul-
2014
Aug-
2014
Sep-
2014
Oct
-201
4
Nov
-201
4
Dec
-201
4
Jan-
2015
Feb-
2015
Mar
-201
5
Apr-
2015
May
-201
5
Jun-
2015
Jul-
2015
Real Year-on-Year GDP Growth - right axis Composite Consumer
Sentiment Index - left axis
Sewol Ferry Disaster
MERS Outbreak
-
NEWS & ANALYSIS Credit implications of current events
19 MOODYS CREDIT OUTLOOK 30 JULY 2015
The Unfolding Collapse in Macaos Economy Is a Credit Negative
Last Thursday, the Monetary Authority of Macao stated that it
expects Macaos (Aa2 stable) economy to contract by a mid-teens
percentage this year, marking a steep deterioration in GDP from a
0.4% decline in 2014. The collapse in economic activity in Macao, a
special administrative region of China, reflects a decline in
tourist arrivals from mainland China, which led to a 37%
contraction in gaming revenues during the first six months of 2015,
according to data released in early July. These developments are
credit negative for Macao because they will sharply erode its still
exceptionally large fiscal and external current account
surpluses.
Chinas anti-corruption campaign and its slowing economy have
dented visitor arrivals from the mainland, which accounted for more
than two thirds of total arrivals in 2014. Mainland tourist
arrivals in the first half of 2015 fell by 4.2% after having risen
by 14.6% during the same period in 2014. The decline in mainland
visitor arrivals, who are primarily drawn to by Macaos casinos, has
had a direct negative effect on gaming industry revenues, as seen
in Exhibit 1. The gaming industry comprises nearly half of total
GDP.
EXHIBIT 1
Macaos Year-over-Year Change in Tourist Arrivals and Gaming
Revenue Tourist arrivals and gaming revenues have dropped
sharply.
Sources: Gaming and Inspection Coordination Bureau, Macao
Statistics and Census Service
In the first quarter of 2015, Macao posted a 25% year-on-year
decline in GDP, extending a 0.4% decline in 2014 (see Exhibit 2).
Factoring in the authorities guidance, we estimate that headline
GDP will decline 15% in 2015, versus a 5.5% contraction we had
estimated earlier, pushing back until 2017 the recovery we had
originally expected would take place in 2016. If this GDP forecast
were to be realized, Macao will most likely post the steepest GDP
decline this year among our sovereign rating universe, marking a
sharp deterioration from its strong GDP growth over the past
decade, which has supported its credit quality. Macao clocked
average growth of 13.8% over the past decade, more than triple the
median average of 4.3% for sovereigns within the same rating
category.
-50%-40%-30%-20%-10%
0%10%20%30%40%50%60%70%80%90%
100%Tourist Arrivals Gross Gaming Revenues
Anushka Shah Assistant Vice President - Analyst +65.6398.3710
[email protected]
Atsi Sheth Senior Vice President +65.6398.3727
[email protected]
Tom Byrne Senior Vice President +65.6398.8310
[email protected]
-
NEWS & ANALYSIS Credit implications of current events
20 MOODYS CREDIT OUTLOOK 30 JULY 2015
EXHIBIT 2
Macaos Year-over-Year Change in GDP
Source: Macao Statistics and Census Service
Macaos substantial financial assets, lack of general government
debt and high foreign reserves provide it with sufficient buffer to
withstand this deterioration in growth. However, the decline in
gaming revenues will dent its fiscal buffers, a key credit support
factor.
The government budgets a fiscal surplus of 4.3% of GDP in 2015,
down from 21.4% of GDP in 2014, but its estimates rely on gaming
revenues averaging MOP20 billion on a monthly basis. Although the
average for the first half of the year is slightly over this mark,
revenues in June fell to MOP17.4 billion, posing risks to the
governments targets.
Given the governments commitment to balance the budget, a
slippage in revenues would have to be offset by reining in
expenditures. Unless Macao were to have a budget deficit, which we
do not expect in 2015, its deep pool of fiscal reserves, which
totaled MOP246.3 billion ($30.8 billion) or 44 months of
expenditures at the end of 2014, would remain unscathed.
Lower receipts from tourism will also whittle down Macaos
current account surplus by about 10 percentage points of GDP in
2015, from 36.5% of GDP in 2014. Nonetheless, the current account
remains in surplus and official foreign reserves have continued to
climb, reaching $18 billion as of June 2015, from $17.4 billion in
May 2015, providing ample cushion against external shocks.
Despite Macaos still exceptionally strong fiscal and external
credit metrics, its lack of economic diversification and reliance
on gaming revenue shows that it is highly vulnerable to event risks
beyond the influence of its policymakers. Most likely, Macao, even
more so than mainland China, has entered a new normal of much
slower economic growth.
Macanese policymakers responded to these developments by
reversing visa restrictions for tourists from the mainland last
month. As a result of these measures, we expect the decline in
tourist arrivals and gaming revenues to moderate somewhat in the
second half of this year.
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
1Q20
11
2Q20
11
3Q20
11
4Q20
11
1Q20
12
2Q20
12
3Q20
12
4Q20
12
1Q20
13
2Q20
13
3Q20
13
4Q20
13
1Q20
14
2Q20
14
3Q20
14
4Q20
14
1Q20
15
-
RECENTLY IN CREDIT OUTLOOK Select any article below to go to
last Mondays Credit Outlook on moodys.com
21 MOODYS CREDIT OUTLOOK 30 JULY 2015
NEWS & ANALYSIS Corporates 2 St. Judes Thoratec Deal Raises
Leverage, but Adds
Minimal EBITDA Home Depot Buys Interline Brands, a Credit
Positive Technicolors Acquisition of Ciscos Connected Devices
Is
Credit Positive Gold Price Decline Is Credit Negative for South
Africas Gold
Mining Companies Youngors Equity Investment in CITIC Limited Is
Credit
Positive Marubenis Additional Investment in Gavilon Is
Credit
Negative
Infrastructure 9 Delay of PJM Transition Capacity Auctions Is
Credit Negative
for Merchant Generators
Banks 10 Greeces Bank Resolution Legislation Is Credit Negative
for
Unsecured Creditors Approval of LME Clears Trade-Compression
Service Is Credit
Positive for Parent Hong Kong Exchanges & Clearing French
Banks See Credit Positive in Livret A Rate Cut Belarus
Worse-than-Expected Economic Deterioration Is
Credit Negative for Its Banks Korean Policy Banks Rising
Exposure to Shipbuilders Is Credit
Negative for All Banks Koreas Banks Will Benefit from New
Measures to Strengthen
Mortgage Underwriting
Insurers 18 IASB Tentatively Approves a Temporary Accounting Fix
for
Insurers, Benefiting Credit Analysis Genworths Sale of
International Protection Division to AXA
Is Credit Positive for Buyer and Seller Brazils New Reinsurance
Regulation Is Credit Positive for
Multinational Players, Negative for Domestic Reinsurers
Sovereigns 24 Ukraines 24 July Interest Payment Does Not
Eliminate Risk
of Payment Moratorium Croatias Debt Metrics Continue
Deteriorating Despite End of
Six-Year Recession Fuel Subsidy Reform Is Credit Positive for
United Arab
Emirates and Abu Dhabi
Sub-sovereigns 30 Toluca, Mexico, Sees the Light to
Credit-Positive
Electricity Savings
Structured Credit 32 SEC Will Not Enforce Risk-Retention on Most
Pre-2015 CLOs,
a Credit Positive
RATINGS & RESEARCH Rating Changes 34
Last week we downgraded eBay, Bank Technique, Credins Bank,
Asurion and Cunningham Lindsey, and upgraded Aramark Services,
Michaels FinCo Holdings, Mapfre Global Risks, Mapfre Asistencia and
nine Santander Drive Auto Receivables Trust 2014 ABS, among other
rating actions.
Research Highlights 40
Last week we published on Thai carmakers, EMEA investment grade
corporates, crossover companies, North American oil and gas, US
multiemployer pension plans, Chinas regional integration, US
capital goods manufacturers, US supermarkets, global private debt
issuance, Chinese property developers, US electric utilities,
French banks, Hong Kong banks, Chinese securities firms, Spanish
banks, US private mortgage insurers, large US banks, China,
Kazakhstan, Iceland, Vietnam, English housing associations, Chinese
sub-sovereigns, Oaxaca Mexico, Pennsylvania schools, Hungarian
covered bonds, US CMBS, Belgian covered bonds, Dutch covered bonds,
French covered bonds, German covered bonds, US RMBS, US tobacco
bonds, US ABS and US CLOs, among other reports.
-
22 MOODYS CREDIT OUTLOOK 30 JULY 2015
-
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Non-NRSRO Credit Ratings are assigned by an entity that is not a
NRSRO and, consequently, the rated obligation will not qualify for
certain types of treatment under U.S. laws. MJKK and MSFJ are
credit rating agencies registered with the Japan Financial Services
Agency and their registration numbers are FSA Commissioner
(Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers
of debt securities (including corporate and municipal bonds,
debentures, notes and commercial paper) and preferred stock rated
by MJKK or MSFJ (as applicable) have, prior to assignment of any
rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal
and rating services rendered by it fees ranging from JPY200,000 to
approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address
Japanese regulatory requirements.
EDITORS PRODUCTION ASSOCIATE News & Analysis: Jay Sherman
and Elisa Herr Amanda Kissoon
CorporatesTeva Will Triple Debt to Buy Allergans Generics
BusinessPearsons Sale of FT Group to Nikkei Is Credit PositiveUK
Bookmaker Ladbrokes Merger with Gala Coral Is Credit Positive
InfrastructureEnergy Future Holdings Bankruptcy Disclosure
Statement Is Credit Negative for OncorKoreas Nuclear Reactor
Commissioning Is Credit Positive for KHNP and KEPCO
BanksHigher Deposit Rates for Argentine Banks Will Narrow
Interest Margins, a Credit NegativeAustralian Major Banks Repricing
of Residential Investor Loans Is Credit Positive
InsurersMeiji Yasudas Acquisition of US-Based StanCorp Benefits
StanCorp
SovereignsKoreas Supplementary Budget Aims to Bolster Growth and
Maintain Fiscal Prudence, a Credit PositiveThe Unfolding Collapse
in Macaos Economy Is a Credit Negative