SEB Norwegian Credit Weekly

Transcription

1 Please note: the statement at the rear of this report contains details of investment banking services recently provided by SEB which could be considered relevant to the subject matter of this report. SEB Norwegian Credit Weekly Henrik Blymke Alexander Jost Øystein Bogfjellmo September 2015

2 Corporates - Primary Primary market remains quiet Monthly primary volume (NOKbn) Primary volume comment The corporate primary NOK market is still very quiet, with mainly IG issuers in the last couple of weeks. However, today Norwegian Air Shuttle said it was contemplating a tap in the outstanding NAS04 (maturity 3 July 2017). The current outstanding amount is NOK 400m and the borrowing limit is NOK 1bn, the company said in a press release. The NAS04 bond traded today in small volumes at +505bp. Annual primary volume (NOKbn) Selected announced primary deals Source for all charts on this page: Stamdata, SEB 1

3 Corporates Secondary DOF spreads widening Secondary volumes by week (NOKbn) Secondary volume comment Secondary corporate volumes continued to fall last week by NOK 0.84bn to NOK 1.43bn, driven by lower volumes, especially within the HY space. Our IG index traded flat w-o-w at +66bp. Our BB index and B index widened by 23bp w-o-w to +696bp and by 58bp w-o-w to +1,387bp, respectively. DOF ASA (DOF09 and DOF10) widened the most by 828bp to +2926bp, and by 461 to +2320bp respectively. BKK AS (BKK25) saw the highest volumes with a total volume of NOK 165m. SEB index - Investment grade (left) & BB/B/CCC (right) Significant transactions spread change (left) and volumes (right) Source for all charts on this page: Stamdata, Oslo Børs, SEB 2

4 News comment BWO Q2, DETNOR and seismic news Credit Research comments on selected news Polarcus (CCC+/Negative) announced on Wednesday, 2 September that it had signed a contract with an undisclosed client for a 3D marine seismic project in Australia. Moreover, on Monday, 7 September Polarcus announced that the company had received a Letter of Award ("LOA") from Shell Myanmar Energy PTE Ltd for a 3D marine seismic project offshore in Myanmar. PGS (not rated) announced on Wednesday, 2 September that the company had decided to cold stack the Ramform Viking once the current project offshore Canada has been concluded in October. PGS had previously announced that Ramform Challenger and Ramform Explorer would be cold stacked post September The decision to stack Ramform Viking is a combination of a very weak market, upcoming classing and the opportunity to reduce capex of USD 60m for 2016 as equipment will be used on other vessels. Furthermore, CEO Reinhardsen said day rates are below opex, the main priority is to preserve cash and this winter will be the toughest winter period ever in the seismic industry. Detnor (BB/Negative): Detnor announced on 3 September that the Ivar Aasen project was on schedule (Q4 2016). We view the start-up of Ivar Aasen in Q as the next important credit trigger as a one-year delay costs around USD 250m. However, we believe Detnor is fully funded even in a scenario were the oil price is: 1) USD 55/bl for H and 2016 (almost fully hedged) and USD 50/bl from 2017 to 2020 or where there is: 2) Capex overrun of 20% every year until start-up of Johan Sverdrup in Q Moreover, we believe the current downturn in the oil service industry with lower margins and prices will have a positive impact on the initial capex estimate for Johan Sverdrup of NOK 117bn in PDO phase one (rig contracts 30-50% down and lower margins for MMO). Dolphin (CCC+/Negative): Dolphin announced on 3 September that the 3D vessel Polar Duke will be cold stacked with immediate effect and returned to the vessel owner once the charter expires in May This means no revenue from the vessel for the rest of 2015, but opex must still be paid which results in cash burn and negative liquidity effect. As a result, there is significant downside risk in our estimates over the winter as operators are now bidding contracts at cash opex (USD ,000/d), but still have vessels idle. Our base case is that Dolphin will run out of liquidity in H1 2016, but after this news this will happen earlier than we first thought (beginning of next year - Q1 2016). BW Offshore (BB+/Stable) Q2: Catcher in focus, but credit remains strong: BW Offshore (BWO) stated in its Q2 report that hull activities on Catcher have slipped due to the yard's inability to progress the hull delivery in accordance with the contractual schedule. Therefore, the risk of capex overruns and reduced earnings on a later delivery of Catcher have increased. The existing firm backlog of USD 4.1bn (USD 9.6bn with options) is related to fields under production and should, therefore, be robust and well covered with firm contracts of 97%, 98% and 76% for 2015, 2016 and 2017, respectively. Moreover, we expect that most of the options will be exercised after firm contracts expire. Therefore, we believe BWO has strong credit support in the current firm EBITDA backlog, and based on our estimates liquidity will be satisfactory even with; 1) USD 200m in capex overrun for Catcher or 2) one year delay and USD 100m capex overrun for Catcher. In addition, based on our estimates BWO is well within bank and bond covenants before the scheduled delivery of Catcher in mid We maintain our BB+/Stable rating. Source for all charts on this page: Oslo Børs and Bloomberg 3

5 International markets Mixed US report and wider itraxx indices itraxx Comments Friday's employment report in the US was a mixed bag with payrolls disappointing but unemployment rate falling to pre-recession levels. The Fed was looking for "some" further improvement in the labour market before raising rates and the last two employment reports have met that criterion, in our view. Looking at the credit indices, we see that the week ended slightly wider w-o-w, with itraxx Main 2bp wider at 73/74, while the Crossover ended 16bp wider at 338/339. Equity markets in Asia are mostly higher this morning (Nikkei +0.3%, Hang Seng +0.2%). Markets continue to focus on the Chinese economy with trade, inflation, retail sales and industrial production data released this week.. Stock market and VIX Week ahead - key economic indicators and events: 7 Sep 13 Sep, 2015 Link to report Mon 7 Thu 10 Other: US & Canadian markets closed for labor day. Gov. auctions: Sweden to sell SGB3110&3109 (11.00) SWE SEB housing price indicator Sep Other: Riksbank to buy SGB1047&1054 (10.00) NOR Manufacturing production Jul SWE Unemployment rate (PES) Aug SWE CPI CPIF Aug Tue NOR CPI CPI-ATE Aug EM U GDP seas. adj. qoq/yoy Q2, p UK BOE rate announcement APF-target Minutes Source for all charts on this page: Bloomberg, SEB Wed 9 Fri SWE Inflation expectations all resp. 1y/2y/5y (Prospera) SWE Unemployment rate seas. adj. Aug WLD SEB Currency Strategy SWE GDP qoq/yoy Q2, f CAN Bank of Canada rate announcement NOR Norges Bank's regional network report NZ RBNZ rate announcement WLD IEA releases monthly oil market report 4

6 Global credit curves, total return and swap rates Spread (over Libor) per rating category IG iboxx, total return (USD) Three months Libor, Euribor and Nibor (%) Spread (over Libor) per rating category HY iboxx USD liquid HY Index, total return USD, EUR and NOK Swap rates (%) Source for all charts on this page: Moody s, Bloomberg 5

7 SEB Credit Research coverage Nordic coverage - with responsible analyst Sorted by name Company Country rating* Outlook Responsible analyst A.P. Møller-Mærsk Denmark A- Stable Øystein Bogfjellmo ABB Sweden A Stable Anders Eriksson Ahlstrom Finland B+ Stable Lasse Rimpi Aker ASA Norway BB+ Stable Øystein Bogfjellmo Aker Solutions Norway BB+ Negative Øystein Bogfjellmo Alfa Laval Sweden BBB+ Stable Anders Eriksson Arla Denmark BBB Negative Mats Nyström Atea Norway BBB- Stable Henrik Blymke Atlas Copco Sweden A Stable Anders Eriksson Atrium Ljungberg Sweden BBB Stable Michael Andersson BillerudKorsnäs Sweden BBB- Stable Ebba Lindahl Borregaard Norway BBB Stable Henrik Blymke BW Offshore Norway BB+ Stable Øystein Bogfjellmo Carlsberg Denmark BBB Negative Mats Nyström Cramo Finland BB Stable Lasse Rimpi Danfoss Denmark BBB Stable Michael Andersson Danish Crown Denmark BBB- Stable Mats Nyström Det norske oljeselskap Norway BB Negative Øystein Bogfjellmo DFDS Denmark BB+ Positive Henrik Blymke Dolphin Group Norway CCC+ Negative Øystein Bogfjellmo Dong Energy Denmark BBB+ Stable Ebba Lindahl EG Gruppen Denmark B+ Stable Fredrik Hössjer Electrolux Sweden BBB+ Watch Negative Mats Nyström Elekta Sweden BBB Stable Ebba Lindahl Elisa Finland BBB Stable Lasse Rimpi Entra Eiendom Norway A- Stable Ericsson Sweden BBB+ Stable Mats Nyström Fortum Finland BBB+ Stable Ebba Lindahl Fortum Värme Sweden BBB+ Stable Ebba Lindahl Fred Olsen Energy Norway BB+ Negative Alexander Jost GasLog USA BB- Stable Alexander Jost Getinge Sweden BB+ Negative Ebba Lindahl Golden Heights Sweden B+ Stable Fredrik Hössjer Haldor Topsoe Denmark BBB Negative Mats Nyström HeidelbergCement AG Germany BBB- Stable Vitali Morgovski Sorted by name Company Country rating* Outlook Responsible analyst Heimstaden Sweden BB Stable Michael Andersson Hemfosa Sweden BB Stable Michael Andersson Hemsö Fastighets AB Sweden BBB+ Stable Michael Andersson Hexagon Sweden BBB+ Stable Mats Nyström Hoist Finance Sweden BB Stable Fredrik Hössjer Hufvudstaden Sweden A- Stable Michael Andersson Huhtamaki Finland BBB- Stable Lasse Rimpi Husqvarna Sweden BBB- Stable Mats Nyström Höegh LNG Norway B+ Stable Alexander Jost ICA Gruppen Sweden BBB Stable Mats Nyström Ikano Bank Sweden BBB Stable David Rostedt Ikano Bostad Stockholm Holding Sweden BB+ Stable Michael Andersson IM Skaugen Norway CCC+ Negative Alexander Jost Investor Sweden A+ Stable Michael Andersson J. Lauritzen Norway B Negative Alexander Jost Jernhusen AB Sweden A Stable Michael Andersson Jotun Norway A- Stable Henrik Blymke Kemira Finland BBB- Stable Kinnevik Sweden A- Stable Michael Andersson Kongsberg Gruppen Norway A- Negative Øystein Bogfjellmo Landshypotek Bank Sweden A- Negative David Rostedt Lifco Sweden BBB- Stable Mats Nyström Länsförsäkringar Bank Sweden A Stable David Rostedt Meda Sweden BB- Stable Ebba Lindahl Metso Finland BBB+ Stable Lasse Rimpi Metsä Board Finland BB Stable Lasse Rimpi Millicom Sweden BB+ Stable Fredrik Hössjer MTG Sweden BBB Negative Mats Nyström Navigator Holdings LTD USA B+ Positive Alexander Jost NCC Sweden BBB- Negative Michael Andersson Neste Finland BBB- Positive Lasse Rimpi Nobina Sweden B Positive Michael Andersson Nokia Finland BB Stable Mats Nyström North Atlantic Drilling Norway B Negative Alexander Jost Nortura Norway BBB- Stable Henrik Blymke 6

8 SEB Credit Research coverage, continued Nordic coverage - with responsible analyst Sorted by name Company Country rating* Outlook Responsible analyst Norwegian Property Norway BBB- Stable NSP Sweden B+ Negative Ebba Lindahl Nynas Sweden B+ Stable Fredrik Hössjer Ocean Yield ASA Norway BB- Positive Alexander Jost Olav Thon Eiendomsselskap Norway BBB+ Stable Orc Group Holding Sweden B Negative Fredrik Hössjer Orkla Norway A- Stable Henrik Blymke Outokumpu Finland B Stable Lasse Rimpi Outotec Finland BB+ Stable Lasse Rimpi Polarcus Norway CCC+ Negative Øystein Bogfjellmo PostNord Sweden BBB+ Negative Ebba Lindahl Prosafe Norway BB+ Negative Alexander Jost Ramirent Finland BB+ Stable Lasse Rimpi REC Silicon Norway B Stable Henrik Blymke Saab Sweden BBB+ Negative Anders Eriksson Sampo Finland BBB Positive David Rostedt Sandvik Sweden BBB Stable Anders Eriksson SAS Sweden B- Stable Henrik Blymke SBAB Sweden A- Stable David Rostedt SCA Sweden BBB+ Stable Mats Nyström Schibsted Norway BBB Stable Henrik Blymke Seadrill Norway BB- Negative Alexander Jost Securitas Sweden BBB Stable Mats Nyström Skandiabanken Sweden A- Stable David Rostedt Skanska Sweden BBB Stable Michael Andersson SKF Sweden BBB Stable Anders Eriksson Songa Offshore Norway B- Negative Alexander Jost Sparbanken Syd Sweden BBB+ Stable David Rostedt Sponda Finland BBB- Stable Lasse Rimpi Sporveien Oslo AS Norway A- Stable Henrik Blymke SSAB Sweden BB- Stable Lasse Rimpi Statkraft Norway BBB+ Stable Ebba Lindahl Statoil Norway AA- Stable Øystein Bogfjellmo Steen & Strøm Norway BBB+ Stable Stena Metall Ab Norway BB+ Postive Henrik Blymke Sorted by name Company Country rating* Outlook Responsible analyst Stora Enso Finland BB Stable Lasse Rimpi Swedavia Sweden A- Stable Michael Andersson Swedish Match Sweden BBB Stable Mats Nyström Swedish Orphan Biovitrum Sweden BB- Stable Ebba Lindahl Tallink Grupp Estonia BB Stable Henrik Blymke TDC Denmark BBB- Stable Vitali Morgovski Tele2 Sweden BBB Stable Fredrik Hössjer TeliaSonera Sweden A- Negative Vitali Morgovski Thon Holding Norway BBB+ Stable ThyssenKrupp Germany BB+ Stable Vitali Morgovski TVO Finland BBB Negative Ebba Lindahl Vacse Sweden BBB Positive Michael Andersson Vasakronan Sweden A- Stable Ebba Lindahl Vattenfall Sweden BBB+ Negative Ebba Lindahl Veidekke Norway BBB Stable Henrik Blymke Volvo Sweden BBB Positive Anders Eriksson Volvofinans Bank Sweden BBB Positive David Rostedt Wilh.Wilhelmsen ASA Norway BBB- Stable Henrik Blymke ÅF Sweden BBB- Stable Michael Andersson Ålandsbanken Finland BBB- Negative David Rostedt 7

9 Available credit research publications and contact details SEB Credit Research, P.O. Box 1843 Vika, 0123 Oslo Norwegian Credit Research publications Norwegian Credit Weekly Norwegian HY & IG Updates Norwegian Utility Report Norwegian banks report Sector / Thematic updates Nordic Credit Research publications Instant Credit comments Credit Insights SEB s CFO Index Head of Credit Research Norway Henrik Blymke Senior Credit Analyst Main coverage: Industrial HY and IG companies Credit Research Analyst Alexander Jost Credit Analyst Coverage: High Yields, Rigs, Shipping Credit Research Analyst Øystein Bogfjellmo Credit Analyst Coverage: High Yields, Oil Service, Oil & Gas John Østreim Nordic HY Update Sector / Thematic updates 8

10 Credit Research Disclaimer Authors' statement of independence (Analyst Certification) We, the authors of this report, hereby confirm that notwithstanding the existence of any such potential conflicts of interest referred to herein, the views expressed in this report accurately reflect our personal views about the companies and securities covered. We further confirm that we have not been, nor are or will be, receiving direct or indirect compensation in exchange for expressing any of the views or the specific recommendation contained in the report. None of the authors of this research report are registered or qualified as a research analyst, representative or associated person under the rules of the FINRA, the New York Stock Exchange any other US regulatory organization or the laws, rules or regulations of any State in the USA. This statement affects your rights This report is confidential and may not be reproduced, redistributed or republished by any recipient for any purpose or to any person. Recipients This report has been prepared, approved and issued by Skandinaviska Enskilda Banken AB (publ) ( SEB ), on behalf of itself and its affiliates for institutional investors. This report must not be distributed to retail clients except for to retail clients of SEB, Oslo Branch and, in case of research distributed via SEB Helsinki Branch, to its retail clients located in Finland. Use This research report is produced for the private information of recipients and SEB is not soliciting any action based upon it. If you are not a client of ours, you are not entitled to this research report, and should destroy it. The document is not, and should not be construed as, an offer to sell or solicitation of an offer to buy any securities. Opinions contained in the report represent the author's present opinion only and may be subject to change. In the event that the author's opinion should change or a new analyst with a different opinion becomes responsible for our coverage of the company, we shall endeavour (but do not undertake) to disseminate any such change, within the constraints of any regulations, applicable laws, internal procedures within SEB, or other circumstances. Good faith and limitations All information, including statements of fact, contained in this research report have been obtained and compiled in good faith from sources believed to be reliable. However, no representation or warranty, express or implied, is made by SEB with respect to the completeness or accuracy of its contents, and it is not to be relied upon as authoritative and should not be taken in substitution for the exercise of reasoned, independent judgement by you. Recipients are urged to base their investment decisions upon such investigations as they deem necessary. To the extent permitted by applicable law, no liability whatsoever is accepted by SEB for any direct or consequential loss arising from the use of this document or its contents. Distribution This research report has been prepared by SEB or its affiliates and is being distributed by SEB offices in Stockholm, Copenhagen, Gothenburg, Oslo, London, Helsinki, Hong Kong, Malmö and Frankfurt. It is being distributed in the United States by SEB Securities Inc. ('SEBEI'), a wholly owned subsidiary of SEB organized under the laws of the State of Delaware, USA. Any United States institutional investor receiving the report, who wishes to obtain further information or to effect a transaction in any security discussed in the report, should do so only through SEBEI and not its affiliates. Addresses and Phone numbers for each office can be found at the end of the report. 9

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12 Explanation of Credit Research recommendations: SEB derives its Recommendations from its appraisal of the Credit Rating of the issuer (itself derived from business risk profile and financial risk profile and from other factors). SEB uses the following recommendation system for the corporate bond market: Overweight over the next six months we expect a position in this instrument to exceed the relevant index, sector or benchmark. Marketweight over the next six months we expect a position in this instrument to perform in line with the relevant index, sector or benchmark. Underweight over the next six months we expect a position in this instrument to underperform the relevant index, sector or benchmark. SEB uses the following recommendation system for CDS spreadsheets: Buy we expect the CDS to outperform the sector performance Neutral we take a neutral view on the CDS, and do not recommend either a buy or sell Sell we expect the CDS spreads to underperform the sector performance. Credit Watch Negative When an identifiable event or short term trend has occurred and when additional information is needed to evaluate the impact on the current rating but the likely outcome is a negative rating change. Credit Watch Positive - When an identifiable event or short term trend has occurred and when additional information is needed to evaluate the impact on the current rating but the likely outcome is a positive rating change. Credit Watch Developing When an identifiable event or short term trend has occurred and when additional information is needed to evaluate the impact on the current rating and the likely outcome is uncertain SEB also assigns credit ratings, definitions of which can be found on our website: Methodology SEB s Credit Research assigns its credit rating to an issuer based on the assessment of an issuer s business risk profile as well as its financial risk profile. The business risk profile includes country risk, industry risk, competitive position, and profitability. The financial risk profile includes financial policies, accounting, cash flow adequacy, capital structure and liquidity. The outcome of the assessment of the two risk profiles is weighed together for a final overall rating. In addition to SEB s credit rating assessment, other factors considered in a particular issuer include the credit ratings assigned to a specific issuer by independent agencies, the value and market price of its securities, macroeconomic factors such as interest rates, promised coupon or yield of the specific instruments, and historical spread developments. Credit Research Distribution (as of 1 Sep 2015) A* B* Overweight 14.0% 2.0% Marketweight 67.3% 15.5% Underweight 18.7% 3.8% A* denotes recommendations for all companies covered B* denotes recommendation for companies to which SEB has provided investment banking services in the last 12 months. Recommendation History Please refer to individual published reports for recommendation history of the companies covered within this report. 11

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