Bonds Daily. ABGSC Daily Report - Bonds. Credit Research - 05 January :34 CET

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1 Credit Research - 05 January :34 CET Bonds Daily ABGSC Daily Report - Bonds Cherry: Equity research initiates coverage with HOLD The bull case scenario implies a return of 37% to SEK 70 per share, but reason for initiating with a HOLD (SP 51.4, TP 50.0) relates to the risk/reward in the case and how we need transparency and proof in the Q4 17e and Q1 18e figures of the turnaround. The turnaround relates to the fact that Cherry posted two profit warnings in H2 17 related to the more troublesome than expected implementation of the ComeOn acquisition made in December The FY 18 EBITDA is estimated to be SEK 557m, representing a 39% YoY increase from the latest company guidance of SEK 400m in EBITDA for FY 17. This leads to NIBD/EBITDA of 1.9x in 18e, which is significantly down from 3.2x at YE 17e. AKSO lowest bidder on NOK ~1bn worth of brownfield work in Brazil According to Upstream this morning, Aker Solutions (BUY) is the lowest bidder on two lots of maintenance contracts from Petrobras in the Campos basin worth reais 432m (NOK ~1bn). We also expect AKSO to be the favourite to win the Libra subsea equipment contract, also potentially worth NOK 1bn. Both these could come in Q1, helping AKSO towards a likely solid order intake this quarter as well. In Q4, we estimate AKSO s order intake at NOK 13.5bn (book-to-bill of 2.2x). DNO: KRG provide some update on its financial position As part of the ongoing budget discussions between KRG and the Central Government of Iraq, KRG has now provided a statement with some details on its running financial position. The monthly payroll costs are estimated at 850bn Iraqi dinars, however, following the salary cut program the running cost are now at ~ 600bn Iraqi dinars. Oil revenues for Q4 has been estimated at 544bn Iraqi dinars. We find the ongoing political situation challenging for DNO, and given what appears to be an underlying budget deficit, we question whether KRG will be able to pay producers according to their contractual entitlements. Click here to open link. Separately, Iraq Oil Report today reports KRG production in December was 304kb/d, an 8% M-o-M increase. EMGS reported weak (13%) vessel utilization, but decent revenues (USD10m) After close yesterday, EMGS reported (as they always do a few days after the end of the quarters) that the Q4 vessel utilization was only 13%. With two vessels available, it means only ~23 vessels days in operations in the quarter. One of the vessels (Thalassa) had no work in the quarter which was expected as it s job in Indonesia ended up starting up in early Q1 18 rather than early December The other vessel (Guardian), concluded its job in Canada somewhat quicker than expected. On a positive note, EMGS also reported that Q4 revenues will be ~USD10m, which is slightly above our USD8.5m estimate. All in all, we are unlikely to make significant estimate changes Stock market Today 1D 1M 3M YTD OSE % 5% 5% 21% SBX % 0% -1% 11% OSX % 17% 15% -17% VIX % -4% -7% -22% High Yield Indices (Spread) Itraxx Xover 5Y 224-5bp -7bp -22bp -57bp Itraxx Xover 3Y 165-2bp -2bp -1bp -42bp HYG US 345-4bp -34bp -26bp -43bp ABG HY index 464-3bp -6bp 12bp -298bp Interest Rates Basis points NIBOR 3M 78-2bp -7bp -4bp -35bp NIBOR 3Y SWAP 127 0bp 8bp 2bp -7bp NIBOR 5Y SWAP 152-1bp 10bp 0bp -4bp US L3M 170 0bp 15bp 34bp 69bp US LIBOR 3Y SWAP 223 3bp 14bp 35bp 56bp US LIBOR 5Y SWAP 231 3bp 11bp 29bp 37bp Currencies USD/NOK % -3% 2% -6% EUR/NOK % 0% 4% 8% SEK/NOK % 1% 2% 5% Commodities Oil - Brent (USD/bl) % 7% 21% 21% Shipping Rates Baltic Dry Bulk 1,341 6% -21% -8% 38% Baltic Tank (Dirty) 676-1% -17% -22% -36% Baltic Tank (Clean) 653 0% -5% 14% -24% Source: Bloomberg Source: ABG Sundal Collier ABGSC Credit Research ABGSC HY Index Alexander Jost alexander.jost@abgsc.no Haakon Amundsen haakon.amundsen@abgsc.no Rikard M Braaten rikard.braaten@abgsc.no Andreas Johannessen andreas.johannessen@abgsc.no Please refer to important disclosures at the end of this report

2 TMS Cardiff Gas contracts three LNG carriers According to Tradewinds, George Economou led TMS Cardiff Gas has ordered three LNG carriers at HHI. Initial reports indicated that Cardiff had ordered one 174,000 cbm vessel with XDF propulsion with expected delivery in 2020 that will go on a seven-year time-charter with Total upon delivery. However, according to Tradewinds Cardiff increased its order to three newbuilds. The timing of delivery is a year after GasLog s announced newbuild two days ago. Assuming these vessels were ordered in 2017, the year ended with 26 orders for LNG vessels, split across 14 LNG carriers, eight FSRU s and 4x small-scale LNG vessels. Teekay LNG Partners Declares distribution of USD 0.14 per unit The USD 0.14 per unit compares to equity consensus of USD per unit, and USD 0.5 per unit in Q3. Corporate HY bonds traded in Oslo at Thursday 4 January Issuer Ticker Volume 04/01/2018 Credit spread maturity Yield change Aker ASA 12/22 FRN AKER09 5.0m % 0.1% Aker ASA 13/18 FRN AKER m % 0.0% Aker Solutions ASA 12/19 FRN AKSO02 4.0m % 0.3% American Tanker Inc. 17/22 9,25% USD C AMTI01 0.2m % 0.8% Bluew ater Holding B.V 13/19 10,00% USD C BLH02 PRO 5.0m % 0.1% BW Offshore Limited 14/19 FRN BWO03 7.0m % 0.9% DOF Subsea AS 17/22 9,50% USD DOFSUB08 0.5m , % 0.0% Exmar Netherlands BV 14/17 FRN EXMAR01 1.0m % 1.2% Golar LNG Partners LP 17/21 FRN USD GOLP03 0.2m % -0.1% Höegh LNG Holdings Ltd. 17/22 FRN C HLNG03 2.0m % 0.3% Marine Harvest ASA 13/18 FRN C MHG m % -0.1% Stolt-Nielsen Limited 12/18 FRN SNI m % -0.1% Songa Offshore SE 12/15 FRN SONG05 0.5m % -0.7% FRN Wilh. Wilhelmsen 05/20 WWI09 3.0m % 0.0% Source: ABG Sundal Collier, company data Price Time to 5 January 2018 ABG Sundal Collier 2

3 ssss Bonds daily Analyst certification I/We, Alexander Jost, Haakon Amundsen, Rikard Magnus Braaten, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report. I/We further certify that I/We have not been, nor am/are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report. Analyst valuation methods When evaluating the credit risk of the issuer, we look at credit ratios, management and corporate strategy, business risk, industry risk and management risk appetite. Further, we look at dividend and financial policies. From this analysis and after an assessment of the asset values as well as any potential structural subordination, ABG Sundal Collier also estimates the company s default probability and the bond s recovery rate. Important Company Specific Disclosure mo For company specific disclosures including employee, partner and ABGSC holdings, Corporate Finance services market making, conflicts of interest of each company mentioned in this report for which ABG Sundal Collier provides coverage (unless it is initiating coverage), please refer to the research section of our website located at All prices are as of market close on 22 November, 2017 unless otherwise noted. Disclaimer This document has been prepared by ABG Sundal Collier which is the marketing name referring to all or any of ABG Sundal Collier ASA, ABG Sundal Collier AB or ABG Sundal Collier Partners LLP and any of their affiliated or associated companies and their directors, officers, representatives and employees. 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4 ABGSC Research Department Joint Global Head of Research Christer Linde Strategy Christer Linde, Technical Bengt Jonassen Capital Goods Anders Idborg Olof Cederholm Emmi Östlund Chemicals Glenn Kringhaug Construction & Real Estate Tobias Kaj Bengt Jonassen Philip Hallberg Consumer Goods Michael Vitfell-Rasmussen Ludvig Kapanen Credit Research Alexander Jost Rikard Magnus Braaten Andreas Johannessen Haakon Amundsen Financials Magnus Andersson Mads Thinggaard Patrik Brattelius Jan Erik Gjerland Truls Langmo Røysland Food & Beverages Michael Vitfell-Rasmussen Healthcare Morten Larsen Sten Gustafsson Christopher W. Uhde Daniel Thorsson lnvestment Companies IT Daniel Thorsson Media Metals & Mining Olof Grenmark Oil & Gas Karl Fredrik Schjøtt-Pedersen Oil Service Haakon Amundsen Lukas Daul Karl Fredrik Schjøtt-Pedersen Online Gaming Pulp & Paper Olof Grenmark Glenn Kringhaug Renewable Energy Casper Blom Retail Ludvig Kapanen Seafood Vidar Strat Services Michael Vitfell-Rasmussen Shipping & Transport Casper Blom Lukas Daul Lars Bastian Østereng Telecom Operators Peter Kurt Nielsen Utilities Small Caps 5 January 2018 ABG Sundal Collier 4

5 Norway Sweden Denmark United Kingdom USA Germany Singapore Pb Vika Box 7269 Forbindelsesvej 12, 10 Paternoster Row, 5th fl 850 Third Avenue, Suite 9-C Schillerstrasse 2, 5. OG 10 Collyer Quay NO-0115 OSLO Norway SE STOCKHOLM Sweden DK-2100 COPENHAGEN Denmark LONDON EC4M 7EJ UK NEW YORK, NY USA DE FRANKFURT Germany Ocean Financial Center #40-07, Singapore Tel: Tel: Tel: Tel: Tel Tel Tel Fax: Fax: Fax: Fax: Fax Fax January 2018 ABG Sundal Collier 5