Important disclosures and certifications are contained from page10 of this report. www.danskeresearch.com Investment Research — General Market Conditions Headlines Low interest environment in Europe to continue unabated Stable Nordic reporting season continues Slightly subdued primary market Higher capital requirements for Swedish Banks Market commentary As the outlook for eurozone inflation remained weak, at its monthly press conference on Thursday, the ECB signalled that it would loosen monetary policy in June. Consequently, we see no short-term end in sight to the current low yield environment, which continues to see investors pushing down risk premiums while scrambling for returns. The highly positive sentiment is, in our view, further underpinned by the fact that more than two- thirds of European CCC rated corporate names now trade at or above par, which when compared with historical default rates for the rating category (27% 1Y average cumulative 1981-2013, according to S&P) and recovery rates (<20%) paints a clear picture of where the market is heading. Furthermore, periphery risk premiums grinded even tighter as the 10-year yield on Italian government bonds touched an all time low of 2.893% on Friday. Overall, the iTraxx Main (Investment grade index) tightened some 3bp w/w landing at +66bp. The iTraxx Crossover index (high yield index) was tighter by 12bp at +260bp. More than halfway through, the reporting season continued with an overall positive tone, with most Nordic corporate issuers delivering solid reports, showing good growth rates as well as earnings improvements. In our view, the only exception was brewery group Carlsberg, which saw sales and earnings remain under pressure from weak Ukrainian and Russian beverage markets. In the Nordic financial space, the positive loan impairment trend continued with DnB reporting very low losses due to reversals from the shipping segment and the Baltics. With reporting season still under way, the primary market remained relatively subdued but a few large issuers came to the market including AAA- rated KFW, which tapped its 2.375% Jan 2018 by NOK250m at around MS+29bp and Swedish capital goods maker Sandvik, which came to the market printing SEK4bn in a split maturity tranche. Selected new issues during the week Name Rating Coupon Maturity Currency Size Spread* Volkswagen Financial A3/A- 2.360% 3Y NOK 500m +22 Sandvik BBB/NR FIX/FRN 5.5/6.5Y SEK 4,000m +91 Mahle Group NR FIX 5Y EUR 300m +140 KFW AAA 2.375% 4Y NOK 250m +29 Note: Ratings are senior unsecured ratings from Moody's and S&P * Mid-swaps for fixed, discount margin for floating Source: Bloomberg, Danske Bank Markets 9 May 2014 Weekly Credit Update Contents Market commentary 1 Selected charts 3 Recently published research 5 Official and shadow ratings 7 iTraxx Europe (investment grade) Source: Bloomberg, Danske Bank Markets iTraxx Crossover (high yield) Source: Bloomberg, Danske Bank Markets Chief Analyst Thomas Hovard +45 45 12 85 05 [email protected]
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Important disclosures and certifications are contained from page10 of this report. www.danskeresearch.com
Investment Research — General Market Conditions
Headlines
Low interest environment in Europe to continue unabated
Stable Nordic reporting season continues
Slightly subdued primary market
Higher capital requirements for Swedish Banks
Market commentary
As the outlook for eurozone inflation remained weak, at its monthly press conference on
Thursday, the ECB signalled that it would loosen monetary policy in June. Consequently,
we see no short-term end in sight to the current low yield environment, which continues
to see investors pushing down risk premiums while scrambling for returns. The highly
positive sentiment is, in our view, further underpinned by the fact that more than two-
thirds of European CCC rated corporate names now trade at or above par, which when
compared with historical default rates for the rating category (27% 1Y average
cumulative 1981-2013, according to S&P) and recovery rates (<20%) paints a clear
picture of where the market is heading. Furthermore, periphery risk premiums grinded
even tighter as the 10-year yield on Italian government bonds touched an all time low of
2.893% on Friday.
Overall, the iTraxx Main (Investment grade index) tightened some 3bp w/w landing at
+66bp. The iTraxx Crossover index (high yield index) was tighter by 12bp at +260bp.
More than halfway through, the reporting season continued with an overall positive tone,
with most Nordic corporate issuers delivering solid reports, showing good growth rates as
well as earnings improvements. In our view, the only exception was brewery group
Carlsberg, which saw sales and earnings remain under pressure from weak Ukrainian and
Russian beverage markets. In the Nordic financial space, the positive loan impairment
trend continued with DnB reporting very low losses due to reversals from the shipping
segment and the Baltics. With reporting season still under way, the primary market
remained relatively subdued but a few large issuers came to the market including AAA-
rated KFW, which tapped its 2.375% Jan 2018 by NOK250m at around MS+29bp and
Swedish capital goods maker Sandvik, which came to the market printing SEK4bn in a
split maturity tranche.
Selected new issues during the week
Name Rating Coupon Maturity Currency Size Spread*
Volkswagen Financial A3/A- 2.360% 3Y NOK 500m +22 Sandvik BBB/NR FIX/FRN 5.5/6.5Y SEK 4,000m +91 Mahle Group NR FIX 5Y EUR 300m +140 KFW AAA 2.375% 4Y NOK 250m +29
Note: Ratings are senior unsecured ratings from Moody's and S&P
* Mid-swaps for fixed, discount margin for floating
Ratings from Standard & Poor’s, Moody’s and Fitch and Danske Bank markets shadow ratings
Source: Standard & Poor’s, Moody’s, Fitch, Danske Bank Markets
Akelius Fastigheter Ab BB+ Pos BB Louis LandemanAmbu A/S BBB- Stable Jakob MagnussenAp Moeller - Maersk A/S BBB+ Stable Baa1 Stable Brian Børsting BUYArla Foods Amba BBB+ Stable Mads RosendalAtlas Copco Ab A Stable A2 Stable Mads Rosendal SELLAvinor As AA- Stable A1 Stable Åse Haagensen HOLDBank 1 Oslo Akershus As BBB+ Stable T. Hovard / L. HolmBwg Homes Asa BB Stable BB- Nils AspeliCarlsberg Breweries A/S Baa2 Stable BBB Stable Brian Børsting SELLColor Group As BB- Stable B+ Kasper F. LarsenDanske Bank A/S A Neg Baa1 Pos A StableDlg Finance As BB- Stable Mads RosendalDfds A/S BB+ Stable Kasper F. LarsenDna Ltd BBB- Stable Kasper F. LarsenDnb Bank Asa A+ Stable A1 Stable T. Hovard / L. Holm HOLDDong Energy A/S BBB+ Neg Baa1 Stable BBB+ Stable Jakob Magnussen BUYDsv A/S BBB Stable Brian BørstingEg Holding B Stable Jakob MagnussenEika Boligkreditt As A- Stable Nils AspeliEika Gruppen As BBB Stable Nils AspeliElectrolux Ab BBB+ Neg Wr WD Brian Børsting HOLDElisa Oyj BBB Pos Baa2 Stable Kasper F. Larsen BUYEntra Eiendom As A- Stable Nils AspeliFinnair Oyj BB Stable Brian BørstingFingrid Oyj AA- Neg A1 Stable A+ Stable Jakob Magnussen BUYFortum Oyj A- Neg A2 Neg A- Neg Jakob Magnussen SELLFred Olsen Energy Asa BB+ Stable Sondre StormyrG4S Plc BBB- Stable Brian Børsting BUYGetinge Ab BBB- Neg Louis LandemanHelgeland Sparebank Baa2 Stable T. Hovard / L. HolmHemso Fastighets Ab BBB+ Stable Wiveca SwartingHusqvarna Ab BBB- Stable Louis LandemanInvestor Ab AA- Stable A1 Stable Brian Børsting BUYIss A/S BBB- Stable Baa3 Stable Brian Børsting HOLDJernhusen Ab A- Stable Gabriel BerginJ Lauritzen A/S B Stable B- Åse HaagensenJyske Bank A/S A- Stable Baa1 Stable Thomas M. Hovard BUYKesko Oyj BBB Stable Mads RosendalKlaveness Ship Holding As BB- Stable B+ Bjørn Kristian RøedMeda Ab BB Pos Louis LandemanMetsa Board Oyj B+ Stable B2 Pos Mads RosendalMetso Oyj BBB Stable Baa2 Neg Mads Rosendal BUYMjolby-Svartadalen Energi Ab BBB+ Watch Louis LandemanNcc Ab BBB- Stable Louis LandemanNeste Oil Oyj BBB- Stable Jakob Magnussen HOLDNokia Oyj B+ B1 Develop BB- Kasper F. Larsen HOLDNokian Renkaat Oyj A- Stable Jakob MagnussenNordea Bank Ab AA- Neg Aa3 Stable AA- Stable T. Hovard / L. Holm SELLNorth Atlantic Drilling Ltd BB Stable BB- Sondre StormyrNorwegian Property Asa BBB- Stable Nils AspeliNykredit Bank A/S A+ Neg Baa2U Stable A Stable T. Hovard / L. Holm BUYOdfjell Se B+ Stable B Bjørn Kristian RøedOlav Thon Eiendomsselskap Asa BBB+ Stable Nils AspeliOlympic Shipping As B+ Stable B Åse HaagensenOutokumpu Oyj B- Pos Mads RosendalOrkla Asa BBB+ Pos Nils AspeliPohjola Bank Plc AA- Aa3 Stable A+ Stable T. Hovard / L. Holm SELLPostnord Ab BBB+ Stable Gabriel BerginProsafe Se BB Stable Åse HaagensenRamirent Oyj BB+ Stable Brian BørstingSaab Ab BBB+ Stable Wr Wiveca SwartingSampo Baa2 Stable T. Hovard / L. Holm HOLDSandnes Sparebank BBB+ Stable T. Hovard / L. Holm HOLDSandvik Ab BBB Stable Mads Rosendal HOLDSas Ab B- Stable Wr Pos Brian BørstingSbab Bank Ab A Neg A2 T. Hovard / L. Holm HOLDScania Ab A- Pos Mads Rosendal HOLDSchibsted Asa BBB Stable Nils AspeliSeadrill Ltd BB+ Stable BB Sondre StormyrSecuritas Ab BBB Stable Wr Brian Børsting HOLDSkandinaviska Enskilda Banken Ab A+ Neg A1 Stable A+ Stable T. Hovard / L. Holm BUYSkanska Ab BBB+ Stable Louis LandemanSkf Ab BBB+ Stable Baa1 Stable Mads Rosendal BUYSolstad Offshore Asa BB- Stable B+ Åse Haagensen
8 | 9 May 2014 www.danskeresearch.com
Weekly C
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Weekly Credit Update
Ratings from Standard & Poor’s, Moody’s and Fitch and Danske Bank markets shadow ratings
Source: Standard & Poor’s, Moody’s, Fitch, Danske Bank Markets
Sparebank 1 Nord Norge A2 Stable A Stable T. Hovard / L. Holm HOLDSparebank 1 Smn A2 Stable A- Stable T. Hovard / L. Holm HOLDSparebank 1 Sr Bank Asa A2 Stable A- Stable T. Hovard / L. Holm HOLDSpar Nord Bank A/S BBB+ Stable T. Hovard / L. HolmSponda Oyj BBB- Stable Louis LandemanStatkraft Sf A- Stable Aaa Stable Jakob Magnussen BUYStatnett Sf A+ Stable Wr Stable Jakob Magnussen HOLDStatoil Asa AA- Stable Aa2 Stable Jakob Magnussen SELLStena Ab BB Stable B2 Stable Brian Børsting BUYStockmann Oyj Abp BB- Stable Mads RosendalStolt-Nielsen Ltd BB+ Stable BB Bjørn Kristian RøedStora Enso Oyj BB Stable Ba2 Neg BB- Stable Mads Rosendal HOLDSuomen Hypoteekkiyhdistys A- Stable T. Hovard / L. HolmSwedavia Ab A- Stable Gabriel BerginSwedbank Ab A+ Neg A1 Stable A+ Stable T. Hovard / L. Holm BUYSwedish Match Ab BBB Stable Baa2 Stable Brian Børsting HOLDSvenska Cellulosa Ab Sca A- Stable Baa1 Stable Mads Rosendal SELLSvensk Fastighetsfinansiering Ab BBB Stable Louis LandemanSvenska Handelsbanken Ab AA- Neg Aa3 Stable AA- Stable T. Hovard / L. Holm HOLDSydbank A/S Baa1 Stable T. Hovard / L. Holm HOLDTallink Group As BB Stable BB- Jakob MagnussenTalvivaara Mining Co Plc C Mads RosendalTdc A/S BBB Stable Baa2 Stable BBB Stable Kasper F. Larsen HOLDTeekay Offshore Partners Lp BB- Stable B+ Kasper F. LarsenTele2 Ab BBB Stable Kasper F. LarsenTelefonaktiebolaget Lm Ericsson BBB+ Neg A3 Neg BBB+ Neg Kasper F. Larsen HOLDTelenor Asa A- Pos A3 Stable Kasper F. Larsen HOLDTeliasonera Ab A- Stable A3 Stable A- Stable Kasper F. Larsen SELLTeollisuuden Voima Oyj BBB Stable Wr BBB Stable Jakob Magnussen BUYThon Holding As BBB+ Stable Nils AspeliUpm-Kymmene Oyj BB Pos Ba1 Stable BB Stable Mads Rosendal HOLDVasakronan Ab BBB+ Stable Louis LandemanVattenfall Ab A- Stable A3 Stable A- Neg Jakob Magnussen HOLDVestas Wind Systems A/S BBB- Pos Kasper F. Larsen BUYVolvo Ab BBB Neg Baa2 Neg BBB Stable Mads Rosendal BUYWilh Wilhelmsen Asa BBB- Stable Bjørn Kristian RøedYit Oyj BB Neg Louis Landeman