Weekly Credit Update 27 October 2015 - Danske Bank
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Weekly Credit Update Analysts
Mads Rosendal
+45 45 14 88 79
27 October 2015 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 reportContents
- General credit market news and current themes
- Scandi High Yield
- Scandi Investment Grade
- Credit indicators
- Coverage universe, credit ratings and recommendations
2What'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)
3Scandi High Yield
4Stena 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 Nordic BB-
700
650
600 VLVY 4.2%
550 2075
500 Nordic BB
TDCDC 3.5%
450 STENA 3015
400 7.875% 2020
350
300
250
200
150
100
50 Years to
0 maturity
0 1 2 3 4 5 6 7 8 9 10 11 12
Source: Bloomberg, Moody’s, Danske Bank MarketsSwitch 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 - BUY –
Difference
Stena 7.875% 2020 Volvo 4.2% hybrid call 2020
Recommendation UNDERWEIGHT MARKETWEIGHT -
ISIN: XS0495219874 XS1150673892 -
Currency EUR EUR -
Credit ratings: ‘B2’ / ‘BB’ ‘Ba1’ / ‘NR’ +4 notches / n.a.
Type of instrument: Senior unsecured Hybrid instrument -
Coupon: 7.875% 4.200% -3.675pp
Maturity: March 15, 2020 1st call, June 10, 2020 +0.2year (measured to 1st
(final legal maturity 2075) call date)
Cash price: 110.50 (indicative, bid) 95.50 (indicative, ask) -15.00
Callable Yes, @ benchmark +50bps Yes, @ price of100 from1st -
or at price of 101 in case of call date onwards.
change of control event.
YTM: 5.27% p.a. 5.30% p.a. +0.03% p.a.
Z-spread: +494bp +500bp +6bp
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 - BUY –TDC 3.5% hybrid call
Difference
STENA 7.875% 2020 2021
Recommendation UNDERWEIGHT MARKETWEIGHT -
ISIN: XS0495219874 XS1195581159 -
Currency EUR EUR -
Credit ratings: ‘B2’ / ‘BB’ ‘Ba2’ / ‘BB+’ +3 notches /+1 notch
Type of instrument: Senior unsecured Hybrid instrument -
Coupon: 7.875% 3.500% -4.375pp
Maturity: March 15, 2020 1st call, February 26, 2021 +1.0year (measured to 1st
(final legal maturity 3015) call date)
Cash price: 110.50 (indicative, bid) 92.75 (indicative, ask) -17.75
Callable Yes, @ benchmark +50bps Yes, @ price of100 from1st -
or at price of 101 in case of call date onwards.
change of control event.
YTM: 5.27% p.a. 5.06% p.a. -0.21% p.a.
Z-spread: +494bps +467bps -27bps
Source: Bloomberg, Danske Bank Markets.Recent trade ideas (high yield)
Recent ideas
Type Trade Idea
Switch Sell Stena 2020, Buy TDC Fundamentally, we see increased credit risk in Stena and Opened 01 Oct 2015
hybrid recommend investors switch into names with same or
stronger credit profiles such as TDC (hybrid). Start spread -27
Switch Sell Stena 2020, Buy Volvo Fundamentally, we see increased credit risk in Stena and Opened 01 Oct 2015
hybrid recommend investors switch into names with same or
stronger credit profiles such as Volvo (hybrid). Start spread 6
Outright Close of Trade Tallink NOK Bonds trade tight to `BB-`curve and bonds no longer
attractive. We take profit on trade initiated 27 February Opened 08 Sep 2015
2018.
2015 (TR: 3.9% / ann. TR 7.9%). Start spread 440
Currency trade Sell SSAB 2019 (SEK) and BUY The spread between the SSAB 2019 (SEK) and SSAB Opened 20 Aug 2015
SSAB 2019 (EUR) (EUR) 2019 is too wide
Start spread 37
Outright Buy Volvo 2075 Hybrid The Volvo 4.2% 2075 Hybrid currently trades at Opened 16 Jun 2015
attractive levels, in our view, with a pick-up of around 20-
25bp to the rating implied spread. Start spread 347
Outright Buy Destia 2019 In our view the Destia 2019 FRN trades at a fairly Opened 26 May 2015
attractive spread when compared to our B+ indicative
senior unsecured rating. This is in our view most likely a Start spread 433
combination of low liquidity and Destia’s PE ownership.
Outright Buy Akelius Residential 2019 The Akelius Residential SEK 2019 FRN 3M Opened 13 Apr 2015
in SEK Stibor+240bps trades wide relative to other similar
unrated SEK bonds. Start spread 225
Currency trade Close of trade SSAB Recent performance in the SSAB EUR bond has closed Opened 10 Mar 2015
the earlier 19bps gap between the EUR and the SEK
2019 bonds. Start spread -2
Outright Buy Tallink 2018. FRN Tallink 2018 in NOK trades cheap to a global Opened 27 Feb 2015
median ‘BB-’ credit curve (converted into NOK). Start spread 470
Outright EGASDK '20 EGASDK '20's, which we see as 'B' indicatively trade way Opened 02 Feb 2015
Source: Danske Bank Markets too cheap relative to the industrial 'B' curve Start spread 664
See the end of this presentation for a list of our coverage including shadow ratings and recommendations
8Best and worst performers (Nordic coverage universe)
- High yield
1 month in local currencies YTD in local currencies
-335 Olympic Ship AS NOK 2017 -206 Teekay Offshore Partners LP NOK 2016
-215 Olympic Ship AS NOK 2019 -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 Nynas AB SEK 2018
-11 Stolt-Nielsen Ltd NOK 2021 -51 Meda AB SEK 2019
-8 Outokumpu OYJ EUR 2019 -51 Beerenberg Holdco II AS NOK 2018
92 Prosafe SE NOK 2016 387 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… 927 Fred Olsen Energy ASA NOK 2019
203 Fred Olsen Energy ASA NOK 2016 1,424 Olympic Ship AS NOK 2019
270 Farstad Shipping ASA NOK 2018 1,458 Farstad Shipping ASA NOK 2018
386 Fred Olsen Energy ASA NOK 2019 2,650 Olympic Ship AS NOK 2017
1,370 Farstad Shipping ASA NOK 2017 2,760 Farstad Shipping ASA NOK 2017
1500 1000 500 0 -500 3000 2500 2000 1500 1000 500 0 -500
Change in local currencies (bp) Change in local currencies (bp)
Source: Bloomberg, Danske Bank Markets (both charts)
9Danske Bank Markets Nordic High-Yield Index
• In tandem with a strong European credit market, we saw Danske Bank Markets Nordic High-Yield Index
positive secondary Nordic High Yield markets during last 106.0 480
week. Spreads tightened some 12bp over the week. 105.5 460
105.0
• The widening trend since the summer seems to have 104.5 440
104.0 420
stopped in October, where the HY index spreads have 103.5 400
remained range bound around the ASW +460 level. 103.0
102.5 380
• Last week we saw Verisure Holding AB (Sweden) issue 102.0 360
EUR400m (8Y), SEK2.8bn (8Y) and EUR700m (7Y) in new 101.5 340
101.0
high yield bonds . 100.5 320
100.0 300
Dec-2014 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 Index sector breakdown
Index start Index end Change Real estate Technology Basic
13% 2% Materials
Date 31-dec-2014 23-okt-2015 15%
Yield 4.7% Utilities
3% Communica
ASW spread, bps 430 456 26 Consumer, tions
Cyclical 9%
# Bonds 110 6%
AVG credit rating BB
Avg duration 2.8
TR since start 3.1% Industrial Consumer,
15% non-cycli.
TR YTD 3.1% 10%
TR MTD 0.6%
Diversified
4% Energy
16%
Source: Bloomberg, Danske Bank Markets [all tables and charts]
10Recent 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
Source: Danske Bank Markets
11Company news from the past week (high yield)
Name News Implication
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
Outokumpu industry expertise and experience in driving turnarounds. However, to us the negative performance of Credit neutral
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,
EG as there will be no primary issuance supply to weigh on secondary spreads. So in summary, the Credit positive
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
Stora Enso around 17% compared to last year on the back of favourable currency effects combined with a ramp Credit neutral
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.
Source: Danske Bank Markets
12Company news from the past week (high yield)
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
PGS Credit positive
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
Dolphin Credit negative
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
Corem following net repayment of loans by SEK154m, acquisitions of properties of SEK122m and capex of Credit neutral
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.
Source: Danske Bank Markets
13Company news from the past week (high yield)
Name News Implication
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 start-
up 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
Norwegian Credit neutral
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% end-
2014. 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
Victoria Park Credit neutral
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.
Source: Danske Bank Markets
14Company news from the past week (high yield)
Name News Implication
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
SSAB Credit negative
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 year-
end 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,
Akelius price SEK468m. After the acquisition, Akelius owns 15 residential properties with 1,485 apartments Credit neutral
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
Meda Credit negative
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
Wihlborgs Credit positive
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
Fastpartner coverage up to 3.2x from 2.7x in 2014, and a slight improvement in solidity. We see no reason to Credit positive
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.
Source: Danske Bank Markets
15Company news from the past week (high yield)
Name News Implication
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
Heimstaden a net LTV of 51%, i.e. with some financial headroom within our 'BB' rating. We see today's Credit neutral
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
Corem in cash (about SEK600m). Corem is now out of the picture regarding the Tribona acquisition and Credit neutral
hence there will be no financial effects for the company.
Akelius (Corp level BBB-, bonds BB+) acquires 279 apartments in Boston. Two central properties
Akelius Credit neutral
built in 2014 and the acquisitions are Akelius’s first in Boston. Total purchase price SEK1,385m.
Source: Danske Bank Markets
16Scandi Investment Grade
17Overweight – Vestas EUR 2.75% 2022
IG credit profile but priced as HY (first published on 19 August)
Indicative ASW offer • On 19 August, Vestas delivered strong and credit
(bps)
290
280
positive Q2 15 results, with a robust globally spread
270 VWSDC '22
260
250
(NR/NR) order intake, a record order backlog, healthy cash flows
240
230 and very strong credit metrics.
220
210
200
190
• Given the volatile global wind turbine markets, the high
180
170 credit quality of some competitors (GE, Siemens), the
160
150
140
recent very harsh restructuring of the company and the
130
120 prudent financial targets introduced (e.g. maximum
110
100
90
target net debt/EBITDA < 1x ), we do not expect the
80
70 group to accelerate future re-leveraging aggressively in
60 Corporates: BBB-
50
40
an unbalanced way.
30
20
10
0
• The key risk factor for this name remains political. The
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 global wind turbine industry is likely to be dependent on
Source: Bloomberg, Moody’s, Danske Bank Markets
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
See Vestas Q2 15: Strong performance – bonds ‘political/volatility’ spread add-on of 40-65bp to the ‘BBB-’
attractively priced, 19 August. curve.
18Recent trade ideas (investment grade)
Recent ideas
Type Trade Idea
Outright Buy Vestas 2022 (revisited). The Vestas EUR 2.75% 2022 trades cheap to a EUR Opened 24 Aug 2015
corporate BBB. curve. Start spread 270
Outright Buy Nykredit AT1 (perpetual) Nykredit has issued an AT1 with a 7.125% trigger.This Opened 10 Aug 2015
hybrid trade attractive to Nordic peers.
Start spread 511
Outright Buy Nykredit T2 CoCo first call Nykredit has issued a tier 2 bond as a CoCo with a 7% Opened 10 Aug 2015
2021 (dated) trigger.We believe the T2 CoCo trades with a discount
to peers because of the CoCo feature. Start spread 361
Sector spread Switch from Securitas 2018 to We recommend to buy the ISS Global A/S 2020 as we Opened 03 Jun 2015
ISS Global A/S 2020 believe valuation is attractive compared to ISS Global
A/S’ BBB-/Positive Outlook from S&P as the bond is Start spread 32
currently trading close to the ‘BBB-’ curve.
Source: Danske Bank Markets
See the end of this presentation for a list of our coverage including shadow ratings and recommendations
19Best and worst performers (Nordic coverage universe)
- Investment grade
1 week in local currencies 1 month in local currencies
-7 TeliaSonera AB EUR 2020 -14 Carlsberg Breweries A/S EUR 2022
-7 TeliaSonera AB EUR 2021 -13 Nordea Bank AB EUR 2025
-7 TeliaSonera AB EUR 2025 -9 Carlsberg Breweries A/S EUR 2019
-6 Carlsberg Breweries A/S EUR 2019 -9 Nordea Bank AB EUR 2022
-6 TeliaSonera AB EUR 2031 -8 Skandinaviska Enskilda Banken AB EUR…
-6 TeliaSonera AB EUR 2019 -6 Statoil ASA EUR 2025
-6 Investor AB EUR 2023 -6 Skandinaviska Enskilda Banken AB EUR…
-6 TeliaSonera AB EUR 2027 -6 Skandinaviska Enskilda Banken AB EUR…
-6 Telenor ASA EUR 2020 -6 Pohjola Bank Oyj EUR 2018
-5 Carlsberg Breweries A/S EUR 2022 -6 Fingrid OYJ EUR 2024
2 Sampo Oyj EUR 2017 14 TeliaSonera AB EUR 2027
2 Skandinaviska Enskilda Banken AB EUR… 14 TeliaSonera AB EUR 2025
2 SBAB Bank AB SEK 2018 14 Svenska Cellulosa AB SCA EUR 2016
2 DONG Energy A/S EUR 2016 14 TeliaSonera AB EUR 2027
3 TeliaSonera AB EUR 2017 15 TeliaSonera AB EUR 2031
3 Lansforsakringar Bank AB SEK 2020 16 TeliaSonera AB EUR 2022
4 Danske Bank A/S SEK 2019 18 TeliaSonera AB EUR 2017
4 Svenska Cellulosa AB SCA EUR 2016 20 Vattenfall AB EUR 2024
7 Neste Oyj EUR 2016 20 Neste Oyj EUR 2016
7 Fortum OYJ EUR 2016 23 Fortum OYJ EUR 2016
10 5 0 -5 -10 30 20 10 0 -10 -20
Change in local currencies (bp) Change in local currencies (bp)
Source: Bloomberg, Danske Bank Markets (both charts)
20Selected 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
Source: Danske Bank Markets
21Company news from the past week (investment grade)
Name News Implication
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
Nordea Credit negative
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
Securitas Credit negative
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.
Source: Danske Bank Markets
22Company news from the past week (investment grade)
Name News Implication
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
Vattenfall Credit positive
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
APMM Credit neutral
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
LKAB Credit negative
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
Neste market expectations. Neste’s credit metrics improved on the back of a strong Free Cash Flow, taking Credit positive
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.
Source: Danske Bank Markets
23Company news from the past week (investment grade)
Name News Implication
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%)
Electrolux Credit neutral
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
APMM Credit neutral
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 Sandvik Mining segment) but the Q3 report did not contain further updates on this, i.e. Sandvik has not Credit negative
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.
Source: Danske Bank Markets
24Company news from the past week (investment grade)
Name News Implication
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.
APMM Credit negative
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
Volvo other hand, was strong with orders increasing 11% y/y and Volvo has upgraded its FY truck order Credit positive
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
Kemira business was not untouched by the lower US shale oil activity, but the decline has not been as bad as Credit neutral
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.
Source: Danske Bank Markets
25Company news from the past week (investment grade)
Name News Implication
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
SAAB high on the agenda after the deal with Brazil regarding 36 Gripen NG was signed in the quarter. Credit Credit neutral
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
DNB to continue its focus on building capital. We are pleased with this, but continue to believe the Credit positive
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 Credit positive
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
Nordea to be cautious about the period ahead given Nordea's relatively large exposure to oil, Russia and Credit neutral
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,
SEB the operating profit was 6% below expectations but otherwise a robust report. We maintain our Credit neutral
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 Credit negative
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.
Source: Danske Bank Markets
26Company news from the past week (investment grade)
Name News Implication
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
Fortum by a EUR761m write down of the Oskarhamn nuclear units 1 and 2. Fortum remains net cash Credit negative
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
Metso Credit negative
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
SBAB in the long term. The housing shortage is becoming increasingly pressing as housing prices continue Credit neutral
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.
Source: Danske Bank Markets
27Company news from the past week (investment grade)
Name News Implication
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
Nordax Bank defence and ability to build up capital, if needed. CET1 at 12.7% vs. 12.3% year-end. Capital req. is Credit negative
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
Hemsö operating cash flow but overall neutral cash flow effects. The property portfolio contributed with Credit neutral
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 Credit positive
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 Credit neutral
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.
Source: Danske Bank Markets
28Company news from the past week (investment grade)
Name News Implication
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
Tele2 remained more or less unchanged from last quarter and we maintain our BBB credit rating on Tele2; Credit positive
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
Husqvarna company, realistically it will no longer be able to reach the target of a 10% EBIT margin in 2016 due to Credit negative
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
Atlas Copco 0.8x Q2 15. Overall, a credit neutral report but due to low expectations the market reaction could be Credit neutral
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
TVO are irrelevant, though, as it is a not-for-profit company with its fixed costs TVO did not offer any news Credit neutral
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.
Source: Danske Bank Markets
29Credit Indicators
30Chart 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 Europe ETF fund flow High yield US ETF fund flow
1,800 8,000
1,600 7,000
Cumulative ETF-flow MEUR
Cumulative ETF-flow MEUR
1,400 6,000
1,200 5,000
1,000 4,000
800 3,000
600 2,000
400 1,000
200 0
0 -1,000
dec- jan- feb- mar- apr- maj- jun- jul- aug- sep- dec- jan- feb- mar- apr- maj- jun-2 jul- aug- sep-
2014 20152015 2015 2015 2015 2015 2015 2015 2015 2014 20152015 2015 2015 2015 015 2015 2015 2015
High Yield - Europe - Fixed Income High Yield - North America - Fixed Income
Source: Bloomberg, Danske Bank Markets [all charts]
34Chart pack: fund flows Europe, net sales US, net sales Sweden, net sales Norway, net sales Source: Macrobond Financial, Danske Bank Markets [all charts] 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 Source: Macrobond Financial, Danske Bank Markets [all charts] 36
Coverage universe, credit ratings
and recommendations
37Our coverage and shadow ratings 1 of 5
Ratings from S&P/Moody's/Fitch and Danske Bank Markets shadow ratings
Danske Bank S&P Moody's Fitch Analyst(s) Recomm.
Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating Outlook
Ahlstrom Oyj BB- Stable M. Rosendal / J. Magnussen
Akelius Residential Property Ab BBB- Stable E. Hjalmarsson / L. Landeman
Ambu A/S BBB- Stable J. Magnussen / M. Rosendal
Ap Moeller - Maersk A/S BBB+ Stable Baa1 Pos B. Børsting/J. Magnussen MARKETWEIGHT
Arla Foods Amba BBB Stable M. Rosendal / B. Børsting
Atlas Copco Ab A Stable A2 Stable M. Rosendal / E. Hjalmarsson UNDERWEIGHT
Avinor As AA- Stable A1 Stable O. Heldal/B. Børsting MARKETWEIGHT
Bank 1 Oslo Akershus As BBB+ Stable L. Holm / K. Jensen
Bank Norwegian As BBB Stable L. Holm / K. Jensen
Beerenberg Holdco Ii As B Stable Ø. Mossige
Billerudkorsnas Ab BBB- Stable M. Rosendal / L. Landeman
Bw Offshore BB+ Stable Ø. Mossige
Cargotec Oyj BBB- Stable M. Rosendal / E. Hjalmarsson
Carlsberg Breweries A/S Baa2 Neg BBB Stable B. Børsting / M. Rosendal MARKETWEIGHT
Cermaq Asa BB Stable K. Bakken
Citycon Oyj BBB Stable Baa2 Stable E. Hjalmarsson / L. Landeman OVERWEIGHT
Color Group As BB- Stable B+ N. Ripa / B. Børsting
Com Hem Holding Ab BB- Pos O. Heldal / L. Landeman
Corem Property Group Ab BB- Stable B+ E. Hjalmarsson / L. Landeman
Danfoss A/S BBB Stable J. Magnussen / B. Børsting
Danske Bank A/S A Stable A2 Stable A Stable
Deep Sea Supply B- Neg I. Båtvik / Ø. Mossige
Dfds A/S BBB- Stable N. Ripa / B. Børsting
Dlg Finance As BB- Stable M. Rosendal / B. Børsting
Dna Ltd BBB- Stable O. Heldal / L. Landeman
Dnb Bank Asa A+ Neg Aa3 Stable L. Holm / K. Jensen UNDERWEIGHT
Dof Asa B+ Neg I. Båtvik/Ø. Mossige
Dof Subsea B+ Neg I. Båtvik/Ø. Mossige
Dolphin Geophysical I. Båtvik
Dong Energy A/S BBB+ Stable Baa1 Stable BBB+ Stable J. Magnussen / L. Landeman MARKETWEIGHT
Dsv A/S BBB Stable B. Børsting / M. Rosendal
Eg Holding B Stable J. Magnussen / N. Ripa
38Our coverage and shadow ratings 2 of 5
Ratings from S&P/Moody's/Fitch and Danske Bank Markets shadow ratings
Danske Bank S&P Moody's Fitch Analyst(s) Recomm.
Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating Outlook
Eidesvik B Neg I. Båtvik / Ø. Mossige
Eika Boligkreditt As A- Stable L. Holm / K. Jensen
Eika Gruppen As BBB Stable L. Holm / K. Jensen
Eksportfinans Asa BBB- Pos Ba3 Stable L. Holm / K. Jensen
Electrolux Ab BBB Stable Wr WD B. Børsting / M. Rosendal MARKETWEIGHT
Elenia Oy J. Magnussen / L. Landeman OVERWEIGHT
Elisa Oyj BBB+ Stable Baa2 Stable O. Heldal / L. Landeman OVERWEIGHT
Entra Eiendom As A- Stable O. Heldal / L. Landeman
Farstad Shipping Asa BB Neg BB- I. Båtvik / Ø. Mossige
Fastpartner Ab BB Stable BB- L. Landeman / E. Hjalmarsson
Fingrid Oyj A+ Stable A1 Stable A+ Stable J. Magnussen / L. Landeman MARKETWEIGHT
Finnair Oyj BB Stable B. Børsting / M. Rosendal
Fortum Oyj BBB+ Stable Baa1 Stable A- Neg J. Magnussen / L. Landeman UNDERWEIGHT
Fortum Varme Holding Samagt Med Stockholms Stad Ab BBB+ Stable J. Magnussen / L. Landeman
Fred Olsen Energy Asa BB- Stable B+ S. Stormyr / B.K. Røed
G4S Plc BBB- Stable B. Børsting / M. Rosendal MARKETWEIGHT
Getinge Ab BB+ Neg L. Landeman / E. Hjalmarsson
Golar Lng Partners Lp BB Stable BB- B.K. Røed / J. Meyer
Golden Close Maritime Corp Ltd B- S. Stormyr / B.K. Røed
Havila CCC+ Neg I. Båtvik / Ø. Mossige
Heimstaden Ab BB Stable BB- L. Landeman / E. Hjalmarsson
Hemso Fastighets Ab A- Stable E. Hjalmarsson / L. Landeman
Hkscan Oyj BB Stable B. Børsting / M. Rosendal MARKETWEIGHT
Hoegh Lng Holdings Ltd BB- Stable B+ B.K. Røed / J. Meyer
Hoist Kredit Ab BB- Stable B+ G. Bergin / L. Landeman
Husqvarna Ab BBB- Pos E. Hjalmarsson / L. Landeman
Ikano Bank Ab BBB Stable L. Holm / K. Jensen
Investor Ab AA- Stable A1 Stable B. Børsting / M. Rosendal OVERWEIGHT
Iss A/S BBB- Pos B. Børsting / M. Rosendal OVERWEIGHT
J Lauritzen A/S B Stable B- B.K. Røed / J. Meyer
Jernhusen Ab A- Stable E. Hjalmarsson / L. Landeman
Jyske Bank A/S A- Stable Baa1U Stable L. Holm / K. Jensen OVERWEIGHT
Kemira Oyj BBB- Stable Wr M. Rosendal / L. Landeman OVERWEIGHT
39Our coverage and shadow ratings 3 of 5
Ratings from S&P/Moody's/Fitch and Danske Bank Markets shadow ratings
Danske Bank S&P Moody's Fitch Analyst(s) Recomm.
Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating Outlook
Kesko Oyj BBB Stable M. Rosendal / E. Hjalmarsson
Klaveness Ship Holding As BB- Stable B+ B.K. Røed / J. Meyer
Loomis Ab BBB- Stable B. Børsting / M. Rosendal
Luossavaara-Kiirunavaara Ab BBB+ Neg L. Landeman / E. Hjalmarsson
Meda Ab BB- Stable L. Landeman / E. Hjalmarsson
Metsa Board Oyj BB Stable Ba2 Stable M. Rosendal / E. Hjalmarsson OVERWEIGHT
Metso Oyj BBB Stable Baa2 Stable M. Rosendal / L. Landeman MARKETWEIGHT
Ncc Ab BBB- Stable E. Hjalmarsson / L. Landeman
Neste Oyj BBB- Stable J. Magnussen / L. Landeman OVERWEIGHT
Nibe Industrier Ab BBB- Stable E. Hjalmarsson / L. Landeman
Nokia Oyj BB+ Pos Ba2 Stable BB Pos O. Heldal / L. Landeman MARKETWEIGHT
Nokian Renkaat Oyj BBB+ Stable J. Magnussen / M. Rosendal
Nordax Bank Ab BBB- Stable L. Holm / K. Jensen
Nordea Bank Ab AA- Neg Aa3 Stable AA- Stable L. Holm / K. Jensen UNDERWEIGHT
North Atlantic Drilling Ltd B+ Neg B S. Stormyr / B.K. Røed
Norwegian Air Shuttle Asa BB- Neg B+ B. Børsting / M. Rosendal
Norwegian Property Asa BBB- Stable O. Heldal / L. Landeman
Nykredit Bank A/S A Neg Baa3U Stable A Stable L. Holm / K. Jensen OVERWEIGHT
Nynas Group B+ Stable B+ J. Magnussen / L. Landeman
Ocean Rig Udw Inc B- Stable Caa3 Neg S. Stormyr / B.K. Røed
Ocean Yield Asa BB BB- Ø. Mossige
Odfjell Se B+ Stable B B.K. Røed / J. Meyer
Olav Thon Eiendomsselskap Asa BBB+ Stable O. Heldal / L. Landeman
Olympic Ship As B+ Stable B I. Båtvik/Ø. Mossige
Orava Residential Reit Plc B+ Stable B+ M. Rosendal / L. Landeman
Orkla Asa BBB+ Pos O. Heldal / L. Landeman
Outokumpu Oyj B Neg M. Rosendal / E. Hjalmarsson
Pacific Drilling Sa B Neg Caa2 Neg S. Stormyr / B.K. Røed
Petroleum Geo Services B+ Neg B1 Neg I. Båtvik
Pohjola Bank Oyj AA- Neg Aa3 Stable A+ Stable L. Holm / K. Jensen MARKETWEIGHT
Posten Norge As A- Stable O. Heldal / L. Landeman
Postnord Ab BBB+ Stable G. Bergin / L. Landeman
40You can also read
