Weekly Credit Update. 21 February Investment Research. Senior Analyst Henrik René Andresen

Transcription

1 Investment Research Weekly Credit Update Senior Analyst Henrik René Andresen February 2017 This document is intended for institutional investors and is not subject to all the independence and disclosure standards applicable to debt research reports prepared for retail investors. Important disclosures and certifications are contained from page 31 of this report

2 - General credit market news and current themes - Scandi high yield/unrated - Scandi investment grade - Credit indicators - Coverage universe, credit ratings and recommendations Contents 2

3 What s on our minds - General credit market news European indices have moved a little bit wider over the past week (itraxx main +0.5bp) and (itraxx Crossover +3bp). with some intraday volatility during the week. In the Nordic region, we saw issuances from among others Securitas, with an issue size of EUR350m and a maturity of seven years, and Schibsted ASA with an issue size of NOK500m and a maturity of seven years. The data calendar for this week is relatively light. In our view, the most interesting data points are preliminary European and US PMIs, which will give an indication of the condition of the industrial cycle. We look for an increase in the US, while the index for Europe is likely to show that the recent upward trend has ended. However, both indices will show that activity remains solid. Source: Bloomberg, Danske Bank Markets Yesterday, we released Scandi Capital Goods Sector Update. We see rising order intake from the mining sector, which we believe is likely to support credit metrics in Within the Scandi capital goods sector, we believe Metso EUR22 and Sandvik EUR22 and EUR26 are attractively priced. Source: Bloomberg, Danske Bank Markets 3

4 Scandi HY/unrated 4

5 Buy NOKIA 2019 USD, trading at wide margin to Nokia 2019 EUR Published on 23 May 2016 Medium credit risk Buy Kungsleden 2019s in SEK - Reducing leverage through rights issue (published 7 February) Relative value, indicative mid spreads ASW (bps) Key arguments for the trade Last week, Kungsleden announced that its board had decided to conduct a rights issue of around SEK1.6bn in order to strengthen its balance sheet. Consequently, we see a positive credit trend for Kungsleden. Kungsleden also presented a revised financial policy, with a near-term target for LTV of 50-55% (previously 55% target for 2020). Kungsleden s bonds have previously traded in line with sector peers such as Klövern and Sagax and the SEK BB index. Considering the company s ambition to strengthen its balance sheet, we think a repricing corresponding to around one credit notch is justified (i.e. around 30-40bp tightening potential on the 2019 bond) As of end-september 2016, Kungsleden s gross LTV was 58%, down from 64% at YE The secured LTV stood at 54% at end- September. In conjunction with the rights issue announcement, the company stated that it will strive for an LTV in the interval of 50-55% at this point in the cycle (pro forma rights issue: 52%). Following the company s announcement, we upgraded our bond recommendation on Kungsleden from Marketweight to Overweight (see Kungsleden - Reducing leverage through rights issue, 7 February). Recent years LTV vs new target range 65% 60% 55% 50% 45% / / / /01 Castellum Ab Corem Property D Carnegie Fabege Ab Fastpartner Ab Heimstaden Hemfosa Fastighe Klovern Ab Kungsleden Sagax Ab Victoria Park Wihlborgs Fastig 40% E 2017E New LTV target range Gross LTV ASW spreads based on observed mid prices in market Source: Bloomberg, Danske Bank Markets Source: Bloomberg, Danske Bank Markets 5

6 Recent trade ideas (high yield and unrated) Type Trade Currency Idea Date Outright Buy Kungsleden 2019s in SEK SEK Considering Kungsleden's ambition to strengthen its balance sheet, we think a repricing 7-Feb-17 corresponding to around one credit notch is justified. Outright Buy SAS SEK 2019 Conv SEK The SAS SEK 2019 Conv. is attractively priced and backed by SAS AB's significant cash position. 20-Jan-17 Outright Buy TDC EUR 3015 Hybrid EUR Outright Buy Castellum 2020's in SEK The TDC 3015 Hybrids trade attractively relative to other 'BB' rated EUR hybrids. Outright Buy Victoria Park 2020s in SEK SEK Building scale through organic growth and acquisitions. SEK Following the acquisition of Norrporten, Castellum has further strengthened its business risk profile. Outright Buy Golar LNG Partners bonds NOK, USD The LNG shipping market is set for several tenders for long-term contracts in We find the yield in Golar LNG Partners attractive at current levels and argue the company should catch up with the relatively strong performance of peers. Outright Buy Fastpartner 2018s in SEK SEK FastPartner s bonds are still trading at generous spread levels and, in our opinion, the bonds should have potential for further tightening. Outright Buy Outukumpu 2021 EUR Outukumpu 2021s trade attractively compared with fair value and the 'B+' EUR industrials curve and we expect further deleveraging. Switch Buy Kemira 2022s, fund by selling Kemira 2019s EUR The spread differential between the Kemira 2019s and 2022s has widened 4-Jan-17 8-Nov-16 2-Nov Oct Oct Sep-16 8-Sep-16 Source: Danske Bank Markets See the end of this document for a list of our coverage including recommendations. 6

7 Best and worst performers (Nordic coverage universe) - High yield/unrated week in local currencies 1 month in local currencies Change in local currencies (bp) Source: Bloomberg, Danske Bank Markets SAS AB SEK 2019 Teekay LNG Partners LP NOK 2018 Stena AB EUR 2019 Stena AB USD 2024 Nokia OYJ USD 2019 Teekay Offshore Partners LP/Teekay UPM-Kymmene OYJ USD 2027 Hoist Kredit AB EUR 2017 Nokia OYJ USD 2039 Vestas Wind Systems A/S EUR 2022 Odfjell SE NOK 2018 Beerenberg Holdco II AS NOK 2018 Stora Enso OYJ EUR 2018 Ship Finance International Ltd NOK 2017 North Atlantic Drilling Ltd USD 2019 North Atlantic Drilling Ltd NOK 2018 Seadrill Ltd SEK 2019 Fred Olsen Energy ASA NOK 2019 Farstad Shipping ASA NOK 2018 Seadrill Ltd NOK Outokumpu OYJ EUR 2019 Vestas Wind Systems A/S EUR 2022 Neste Oyj EUR 2019 Neste Oyj EUR 2022 Kemira OYJ EUR 2022 Nokia OYJ USD 2039 Hexagon AB SEK 2018 ICA Gruppen AB SEK 2019 ICA Gruppen AB SEK 2018 Ship Finance International Ltd NOK 2017 Neste Oyj EUR 2022 Kemira OYJ EUR 2022 Nokia OYJ USD 2039 Hexagon AB SEK 2018 Change in local currencies (bp) Source: Bloomberg, Danske Bank Markets ICA Gruppen AB SEK 2019 ICA Gruppen AB SEK 2018 Ship Finance International Ltd NOK 2017 Ahlstrom OYJ EUR 2019 Technopolis OYJ EUR 2020 Orava Residential REIT PLC EUR

8 Recent Nordic high yield/unrated issuance* Date Issuer Coupon Ccy Volume (m) Maturity S&P / Moody s / Fitch ASW/DM Link Mobility Group Asa 4.75% EUR 50 Feb-22 / / Mercury Bondco 7.125% EUR 600 May-21 B / B3e / Horizon Parent Holdings 8.25% EUR 350 Feb-22 CCC+ / / Veneto Banca SpA 0.5% EUR 1,750 Feb-20 B / / BBB Banca Monte Dei Paschi di Siena EUR003M +85bp EUR 500 Jan-21 / B2 * / B- * Tobin Properties AB STIB3M +900bp SEK 470 Jul-19 / / Forex Bank AB STIB3M +565bp SEK 250 Feb-27 / / Norwegian Air Shuttle AS STIB3M +500bp SEK 800 Aug-20 / / Teekay LNG Partners NIBOR3M +600bp NOK 1,200 Oct-21 / / Höegh LNG Holdings NIBOR3M +500bp NOK 1,500 Feb-22 / / Olav Thon Eiendomsselskap 2.9% NOK 250 Jan-27 / / Sparebank 1 Ringerike NIBOR3M +83bp NOK 270 Mar-22 / / Brage Finans SA NIBOR3M +94.5bp NOK 350 Sep-18 / / Vasakronan AB NIBOR3M +91bp NOK 600 Jan-22 / / Sveavalvet AB STIB3M +650bp SEK 250 Dec-19 / / Tele2 AB STIB3M +87bp SEK 1,000 Mar-19 / / Norlandia Health Care STIB3M +450bp SEK 1,100 Dec-21 / / Norlandia Health Care NIBOR3M +450bp NOK 750 Dec-21 / / Hufvudstaden Fastigheter AB 1.2% SEK 500 Dec-21 / / Volvo Car AB STIB3M +235bp SEK 2,500 Mar-22 BB / Ba2 / Volvo Car AB 2.5% SEK 500 Mar-22 BB / Ba2 / Hemfosa Fastigheter AB STIB3M +280bp SEK 750 Dec-19 / / Host Property AB STIB3M +600bp SEK 300 Dec-19 / / Kongsberg Gruppen ASA 2.9% NOK 450 Dec-23 / / 119* Sparekasse Kronjy (Tier 2) CIBO03M +400bp DKK 200 Dec-26 / / 400 * Excluding increases in existing bond issues (taps) Source: Bloomberg, Danske Bank Markets 8

9 Company news from the past week (high yield/unrated) Name News Implication Outokumpu Outokumpu (OW): Solidium has sold a large chunk of Outokumpu shares, decreasing its holding from 29.9% to 24.35%. The Outokumpu shares have performed extremely strongly over the past year (+254%) and now is probably a good time to reduce exposure. Exposure has not always been good for the Finnish government, with Outokumpu going through some tough years, including multiple rights issues. There is no government support factored into Moody's rating but the holding has been positive for creditors in the past so this is slightly negative from a credit perspective, in our view. If the holding stays around 25%, it should be fine but if this signals the beginning of a full exit, it would be more negative (over the longer term). Still, with a stronger steel market, a better cost structure and lower debt, it is not likely, in our view, that Outokumpu will need support in the immediate future. Credit negative Stockmann Stora Enso Norwegian Air Shuttle Victoria Park Finnair TVO Kungsleden SSAB Source: Danske Bank Markets Stockmann (MW): The Q4 16 results were somewhat better than expected. Q4 EBIT was EUR37m. As expected, Stockmann will not pay a dividend for 2016, which is positive from a credit perspective. The group guides for falling sales and improving EBIT in We expect Q1 17 EBIT to be negative due to normal seasonality. Also, positive was that the real estate assets were revalued to EUR950m versus EUR918m at end-q4 15. The real estate assets are one of the key positives from a credit perspective, as these are largely unencumbered and easily cover Stockmann s outstanding bond maturities. We note that adjusted leverage is still fairly high at around 6-7x but we expect it to come down once earnings improve in Stora Enso (MW) is shutting down a coated paper machine in Sweden. The mill has a capacity of 100,000t pa and employs 140 people. The shutdown will lead to annual cost savings of EUR12m, with a one-off of EUR17m in restructuring charges, to be booked in the Q1 17 results. Norwegian Air Shuttle (NAS) reported a mixed Q4 16, with declining underlying operating profit y/y. However, the significant capacity expansion currently being undertaken is likely to cause increased earnings volatility. Hence, we believe a longer term view is needed. This said, NAS s highly leveraged balance sheet exposes it to the high volatility in the airline industry. Most bonds are trading close to the B industrial curve, which we believe is fair. We keep our Marketweight recommendation on NAS. Victoria Park continued to show strong growth in Q4 due to a combination of continued acquisition activity and organic investments. The company s gross loan-to-value fell to 60% at YE 2016 (end-q3 63%) with a net LTV of 56%. We maintain our Overweight recommendation on Victoria Park s bonds. Considering its focus on the more stable residential market and its long average debt maturity profile, we consider the bonds attractively priced relative to relevant sector peers and versus the SEK real estate BB curve. Given the company s leverage and relatively high share of encumbered assets, our assessment of an expected recovery for bondholders in a potential default scenario is 10-30%. Finnair (MW) delivered Q4 16 results much as expected. Metrics weakened slightly y/y due to heavy fleet investments but Finnair still holds a net cash position and a significant level of unencumbered assets on its balance sheet. Finnair expects 8-10% capacity growth in Overall, we believe that bond valuation is fair with the hybrid bond trading between the B and B+ industrial curve. The heavy outstanding capex programme is mitigated by a solid financial starting point from a credit perspective. We maintain our Marketweight recommendation on Finnair. TVO's (OW) credit should benefit from S&P s upgrade of UPM-Kymmene (indirectly owns 25% of TVO). UPM is now BBB- with positive outlook, up from BB+ with positive outlook. This is clearly positive for TVO, as its owners are liable for all fixed costs in the company. As such, TVO s credit quality is closely tied to the credit quality of its owners. With UPM s upgrade to investment grade, we now see the average rating of its owners as somewhere in the high BBB area. As such, we feel that the chance of an upgrade of TVO has moved closer following the move on UPM. However, we do not expect an upgrade in coming months, as we think S&P wants more clarity on the Areva rescue and wants to avoid its rating yo-yoing up and down too frequently. We expect an upgrade in the next 18 months because of (1) stronger Nordic power prices, (2) a higher likelihood of timely completion of OL3 and (3) TVO s owners improving credit quality (we also expect positive rating action on Stora Enso short term). Overall, we believe this is credit positive for TVO, although the UPM upgrade was widely expected by the market. Kungsleden reported decent Q4 earnings and leverage declined further sequentially, with a gross LTV of 57% at YE 2016 (end-q3 58%). Following Kungsleden's announcement of a SEK1.6bn rights issue, we moved to an Overweight on the company's bonds. Kungsleden s bonds have previously traded in line with sector peers such as Klövern and Sagax and the SEK BB index. Considering the company s aim to strengthen its balance sheet, we think a repricing corresponding to around one credit notch is justified (i.e. around 30-40bp tightening potential on the 2019 bond). SSAB delivered a somewhat mixed Q4 16 report, with a better-than-expected top line and slight miss on the bottom line. The outlook was fairly upbeat but an unplanned production halt at the Oxelösund Mill is set to reduce deliveries by almost 70,000t (3-5%) in the first quarter of Positively, credit metrics improved further, entering BB territory significantly ahead of S&P s base-case scenario. SSAB will not pay a dividend for 2016 and will focus on reducing debt by a further SEK2.9bn, paving the way for positive rating action over the short term. While an upgrade is partially priced in, we see potential for a further improved performance and we maintain our Overweight recommendation Credit positive Credit neutral Credit neutral Credit positive Credit neutral Credit positive Credit neutral Credit neutral 9

10 Scandi investment grade 10

11 Buy NOKIA 2019 USD, trading at wide margin to Nokia 2019 EUR Published on 23 May 2016 Buy Vestas 2.75% 2022 outright (revisited) Trading wide compared with companies with comparable credit risks (published 9 February) Key arguments for the trade Vestas bonds are trading just tighter than the BB+ fair value curve, which leaves them with substantial performance potential compared with the BBB fair value curve. Even when adjusting for a premium for Vestas s unrated status, we see a tightening potential of around 50bp. Vestas delivered very strong Q4 16 results. The performance was driven by both the Projects division (benefiting from global demand for wind turbines) and the stable service segments. Strong Q4 16 FCF left reported net debt to EBITDA at negative 1.8x. We see the corresponding metric in adjusted terms at 0.7x (we apply a conservative approach and treat prepayments as debt). Relative value (EUR), indicative mid spreads Ask Spread (EUR)* VWSDC 2.75% '22 Industrials BB+ Industrials BBB- Industrials BBB 0 YTW** * Z-spreads. Discount margin for floaters. Swapped to indicated currency. ** Years-to-worst Note: Fair value curve(s) based on Danske Bank Markets' (mid) peer group of European issuers We see continued strong momentum for Vestas s business case, driven by global demand from renewable energy and driven by the industry s success in cost cutting, which in some instances already makes wind more attractive than conventional generation methods, even without subsidies. Earnings from Vestas s service segment are relatively stable as they originate from long-term service and maintenance contracts. Vestas is actively growing this and has also won contracts on non-vestas turbines. We expect Vestas s share of earnings from this segment to grow considerably from the current 14%. See Vestas Wind Systems - Q4 16: Temporary cash flow peak, 8 February. Credit spread development ASW Issue Currency Oct-2016 Nov-2016 Nov-2016 Dec-2016 Jan-2017 Jan-2017 VWSDC EUR 2.75% 2022 IBOXX EURO Industrials Source: Bloomberg, Danske Bank Markets Source: Bloomberg, Danske Bank Markets 11

12 Recent trade ideas (investment grade) Type Trade Currency Idea Date Outright Buy Vestas EUR2022s EUR Vestas' bonds are trading just tighter than the BB+ fair value curve, 9-Feb-17 which leaves them with substantial performance potential compared with the 'BBB' fair value curve. Switch Switch to SHBASS 1.125% 2022s from SHBASS 4.375% 2021s Outright Buy Carlsberg EUR 2024 (revisited) EUR We recommended buying the Carlsberg EUR2024. The fundamental case has improved further following the H1 16 report from Carlsberg. Switch Buy Carlsberg EUR 2024 and fund it by selling Carlsberg EUR 2019 (revisited) EUR Outright Buy TVO EUR, SEK EUR The SHBASS 1.125% 2022s have underperformed the SHBASS 4.375% 2021s since the bank reported its Q3 16 results. While the impact of Brexit and Basel 4 remain risks, they do not justify the kink in the SHBASS curve, in our view. Outright Buy Sandvik EUR2022 and EUR2026 EUR Donald Trump could be the trigger for mining bonds. Combined with a very attractive valuation for the Sandvik EUR 2022 and EUR 2026 bonds, we have become positive on the name. Outright Buy Metso EUR 2022 EUR Trump could be the trigger for mining bonds. Combined with the very attractive valuation of the Metso EUR 2022 bond, we recommend buying the bond. TVO s EUR curve trades attractively compared with the fair value BB+ industrials curve and its SEK curve offers a pickup compared with the EUR curve. Outright Buy Caruna 1.5% 2023 outright EUR Being BBB+ rated, Caruna trades between the BBB- and the BBB curve. We recommended buying the Carlsberg EUR2024 and funding it by selling the Carlsberg EUR2019. The fundamental case has improved further following Carlsberg's H1 16 report. 4-Jan Nov Nov Oct-16 3-Oct Aug Aug-16 Switch Buy DONGAS 3% call 2020 and fund by selling DONGAS 4.875% call 2018 EUR The DONGAS 3% call 2020 have clearly underperformed the DONGAS 4.875% call 2018 over the past six months. This is unjustified given the benign newsflow in DONG Energy. 9-Aug-16 Source: Danske Bank Markets See the end of this document for a list of our coverage including recommendations 12

13 Best and worst performers (Nordic coverage universe) - Investment grade 1 week in local currencies 1 month in local currencies -37 SpareBank 1 SMN NOK Teollisuuden Voima Oyj Teollisuuden Voima Oyj Teollisuuden Voima Oyj EUR Danske Bank A/S SEK G4S International Finance PLC EUR Teollisuuden Voima Oyj EUR Metso OYJ EUR Danske Bank A/S SEK Teollisuuden Voima Oyj EUR Nordea Bank AB EUR Nordea Bank AB EUR SpareBank 1 SMN EUR Svenska Handelsbanken AB EUR Statkraft AS NOK OP Corporate Bank plc EUR AP Moller - Maersk A/S EUR SpareBank 1 SMN EUR Atlas Copco AB EUR SpareBank 1 SR-Bank ASA EUR TDC A/S EUR SpareBank 1 SR-Bank ASA NOK SpareBank 1 Nord Norge NOK Swedish Match AB SEK SpareBank 1 SMN NOK SpareBank 1 SR-Bank ASA NOK SpareBank 1 SMN NOK Fortum Varme Holding samagt med 6 Telia Co AB EUR Telia Co AB EUR SpareBank 1 SR-Bank ASA NOK SpareBank 1 SMN NOK SpareBank 1 Nord Norge NOK Telia Co AB EUR Swedish Match AB SEK Telia Co AB EUR Fortum Varme Holding samagt med 8 Telia Co AB EUR SpareBank 1 Nord Norge NOK SpareBank 1 Nord Norge NOK Change in local currencies (bp) Source: Bloomberg, Danske Bank Markets Change in local currencies (bp) Source: Bloomberg, Danske Bank Markets 13

14 Selected new investment-grade issues* Selected new issues (investment grade) Date Issuer Coupon Ccy Volume (m) Maturity S&P / Moody s / FitchASW/DM 13/02/2017 Securitas AB 1.125% EUR 350 Feb-24 BBB / / /02/2017 Tele2 AB 2% SEK 800 Feb-23 / / 50 15/02/2017 Bnp Paribas Home Loan Co 0.375% EUR 500 Jul-24 / / AAAe 17/02/2017 Intesa Sanpaolo SpA EUR003M +137bp EUR 400 Feb-24 BBB- / Baa1e / BBB+e 74 14/02/2017 Berlin Hyp AG 0.375% EUR 500 Feb-25 / Aaae / A+ - 10/02/2017 Skandinaviska Enskilda 0.3% EUR 500 Feb-22 A+ / Aa3e / AA /02/2017 Ca Immobilien Anlagen AB 1.875% EUR 175 Feb-24 / Baa2 / - 16/02/2017 KfW 0.15% EUR 200 Feb-24 AAA / Aaa / AAA 37 15/02/2017 Banca Imi SpA 2.7% EUR 150 Feb-25 BBB- / A3 / BBB /02/2017 Ca Immobilien Anlagen AG 1.875% EUR 175 Feb-24 / Baa2 / - 14/02/2017 Berlin Hyp AG 0.375% EUR 500 Feb-25 / Aaae / A /02/2017 Nordlb Lx Cov Bond Bk 0.25% EUR 500 Aug-21 / Aa1e / AAAe * Excluding increases in existing bond issues (taps) Source: Bloomberg, Danske Bank Markets 14

15 Company news from the past week (investment grade) Name News Implication Atlas Copco Atlas Copco once again reported a solid quarter and as credit metrics improved versus Q3 16 rating agencies are likely to stick with their initial reaction to the spin-off of the mining business, which means that there will be no change to the current A/Stable rating. However, we believe the bonds are fairly valued at current levels and with the increased uncertainty regarding the longer term M&A strategy post the spin-off we do not see a decent risk-reward in the bonds. Hence we maintain our Underweight recommendation on Atlas Copco. Credit positive NIBE NIBE posted a solid Q4 report largely in line with SME Direkt consensus. Following the SEK3bn rights issue, debt metrics strengthened significantly in Q4. Adjusted net debt-to-ebitda was 2.5x at end-q4, corresponding to a sequential decline from 3.8x. When recent acquisitions are fully consolidated in 2017, we estimate group sales of SEK18bn and, consequently, a limited need for larger structural measures with regard to reaching the revenue target of SEK20bn. By end-2017, we estimate debt headroom of some SEK3bn to the 3.0x adjusted leverage threshold. Spreads of NIBE s bonds are in line with the SEK BBB- curve and with those of peers BillerudKorsnäs and Lantmännen. We find these levels justified and maintain our Marketweight recommendation. Credit positive Securitas Securitas reported a solid Q4 16 from a credit perspective. Despite warnings of lower growth in Europe in coming quarters, we expect the company to continue focuing on deleveraging in 2017, which should support the case. However, bonds are already trading tighter than the BBB industrial curve and as we expect Securitas to enter into new acquisitions once Diebold has been integrated, we see only limited chance of a rating upgrade. Hence, we believe bonds are fully valued and stay Marketweight on Securitas. Credit positive FKA Fingrid FKA reported a decent 2016 with EBITDA of NOK807 versus NOK870m in 2015 despite a 7% increase in revenue y/y. The lower operating result is due primarily to lower earnings in Agri Eiendom and portfolio companies as the core Landbruk and Cernova report higher or unchanged EBITDA y/y, which we find comforting. Net debt increased to NOK3.5bn, from NOK3.0bn in Net debt to COOP adjusted EBITDA increased to 3.3x, from 2.7x at end-2015 due to a combination of lower operating earnings but also due to higher capex (NOK854m versus NOK223m in 2015), which was the key driver for the increase in net debt. Overall, we consider this a slightly credit negative report due to higher leverage; however, FKA continues to be well positioned, in our view. Bonds are trading slightly wider than the BBB- industrial curve, which we believe is fair. The strong market position and high barriers to entry are mitigated by the risk of increased food imports into Norway. In this respect, the government s overall conditions for the farming industry are vital for FKA. Fingrid s Q4 16 results were driven by higher tariffs and volumes y/y and higher imbalance power sales. Clean comparable EBITDA rose 30% y/y. This helped boost cash flows, taking down net debt marginally. We now see metrics at stronger levels, which could prompt Moody s to upgrade it to the double A space. Even though bonds are very tight, we maintain our Overweight recommendation on the name, seeing a chance of Moody s upgrading and good reward to risk. Credit negative Credit positive SBAB SBAB reported Q4 16 results with increased net interest income despite lower lending volumes q/q. It still increased new lending, while efficiency improved compared with Credit quality remained solid with a minor reversal in impairments and an unchanged impairment ratio. The CET1 ratio increased by almost 400bp to 32.2%. SBAB s bonds (EUR senior and SEK AT1) are priced at tight spreads relative to their rating and we see no reason for this to change in the near term given the government ownership and stable performance and thus reiterate our Marketweight recommendation. Credit neutral Source: Danske Bank Markets 15

16 Company news from the past week (investment grade) Name News Implication UPM-Kymmene UPM (OW): S&P has followed Moody's and upgraded UPM-Kymmene to BBB- with a positive outlook. We note that, as was the case for the Moody's upgrade, the positive outlook is longer term in nature (24 months) and contingent on leverage staying at the current low level (0.7x reported and 1.3x adjusted), i.e. it is our view that rating agencies want to see how aggressive UPM will be in terms of new capex, M&A or shareholder remuneration before upgrading to BBB. In any case, the upgrade should enable UPM to issue new debt at very low spreads (being CSPP eligible). However, with negotiations with the Uruguayan government dragging out, a new pulp mill (and higher capex) might be a long way off and as such UPM may not need any funding right now. Credit positive SCA SCA (OW): As previously communicated by SCA, the group intends to take up a EUR2.6bn unsecured syndicated bridge facility to finance the acquisition of BSN, which has been approved by the EU. The syndicate comprises 15 banks and the facility will have a maturity of 1Y, so SCA will have a 12-month window to refinance with longer dated debt in the bank/bond market. In our base case, we expect SCA Hygiene to come to the market sometime in Q2-Q3 17. Credit neutral Sandvik SAAB PostNord Sandvik (OW): S&P has lifted the outlook on the BBB rating to Positive from Negative, following the Q4 16 results. S&P states that it is likely that Sandvik's rating will be lifted if metrics improve sustainably. We believe this refers to some of the improvement seen in Q4 16 being due to a decline in pension liabilities of around SEK1bn to SEK6bn and around half the improvement in the operational result beings due to favourable currency movements. At end-2016 adjusted net debt to EBITDA was 2.4x, down from 3.2x at end We have an Overweight rating on Sandvik and continue to believe that rising order intake in the Mining division, which accounts for nearly 40% of group revenue, is likely to support earnings and leverage in Despite negative organic development in Q4, SAAB reached its full-year revenue growth target of 5% y/y in For 2017, SAAB expects organic revenue growth above 5% and the adjusted EBIT margin to improve y/y. The FY 2016 adjusted EBIT margin declined somewhat y/y (6.3% versus 6.6% in 2015) but SAAB attributed this to a major USD236m order being delayed into Adjusted net debt-to-ebitda was largely unchanged q/q at 3.8x but when including SAAB s substantial short-term investments (SEK4.5bn), the metric improved from 2.4x to 2.0x. We have an Overweight recommendation, reflecting solid growth prospects (the backlog at year-end 2016 was 3.8x LTM revenues) and a pickup to the SEK BBB+ curve. PostNord reported a record fall in Danish mail volumes (-23% y/y), which took operating income in PostNord Denmark to a loss (excluding one-offs). Due to the continued and increasingly weak situation in the Danish business, PostNord will introduce a completely new production model in Denmark, which will entail major restructuring costs and losses in the coming two years. In Q4, PostNord took a goodwill and tangible assets impairment of SEK1.2bn in Denmark, which resulted in a quarterly EBIT of negative SEK1bn. Swedish mail volumes are also declining at a fast pace y/y, but EBIT excluding one-offs increased y/y due to higher parcel (e-commerce) volumes and cost adjustments. From a credit perspective, we note a positive cash contribution to the group of around SEK900m from the Posten Pension fund, which (together with reduction in pension provisions due to higher rates) helps decrease net debt and takes adjusted leverage just below 2x from 2.8x in Q3. We continue to see challenging times ahead for PostNord and remain cautious on its SEK bonds, currently trading in line with the BBB curve. Credit poistive Credit neutral Credit negative Source: Danske Bank Markets 16

17 Credit indicators Credit Indicators 17

18 Chart pack: euro spreads and returns Euro investment grade ASW, iboxx indices Investment grade total return, iboxx indices, Jan-16=100 Euro high yield ASW, Merrill Lynch indices High yield total return, Merrill Lynch indices, Jan-14=100 Source: Macrobond Financial, Danske Bank Markets [all charts] 18

19 Chart pack: relative value itraxx vs iboxx EUR CDS spreads Nordic banks Euro vs US CDS indices investment grade (Markit) Euro vs US high-yield bond indices (Merrill Lynch) Source: Macrobond Financial, Danske Bank Markets [all charts] 19

20 Chart pack: general market development European swap and government yields 3M Libor, US, Euro area, Sweden and Norway Euro swap curve spread EUR/USD basis swaps Source: Macrobond Financial, Danske Bank Markets [all charts] 20

21 Chart pack: funds flow Europe, net sales US, net sales Sweden, net sales Norway, net sales Source: Macrobond Financial, Danske Bank Markets [all charts] 21

22 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] 22

23 Chart pack: Cash vs. CDS Sub financials cash vs CDS Senior financials cash vs CDS itraxx main vs iboxx non-financials A itraxx main vs iboxx non-financials BBB Source: Macrobond Financial, Danske Bank Markets [all charts] 23

24 Coverage universe, credit ratings and recommendations 24

25 Our coverage 1 of 5 Ratings from S&P/Moody's/Fitch S&P Moody's Fitch Sector Analyst(s) Recomm. Company Rating Outlook Rating Outlook Rating Outlook Ahlstrom Oyj MATERIALS M. Rosendal / J. Magnussen MARKETWEIGHT Akelius Residential Property Ab BBB- Stable REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Aktia Bank Plc A- Stable A3 Pos BANKS K. Jensen / G. Bergin Alandsbanken Abp BBB Stable BANKS K. Jensen / G. Bergin Ambu A/S HEALTHCARE J. Magnussen / M. Rosendal OVERWEIGHT Ap Moller - Maersk A/S BBB Neg Baa2 Neg SHIPPING B. Børsting/J. Magnussen MARKETWEIGHT Arla Foods Amba CONSUMER GOODS M. Rosendal / G. Bergin Atlas Copco Ab A Stable A2 Stable A Stable MACHINERY & HEAVY INDUSTRIALS B. Børsting / M. Rosendal UNDERWEIGHT Avinor As AA- Neg A1 Stable TRANSPORTATION H. Syed/ B. Børsting MARKETWEIGHT Balder Baa3 Stable REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Beerenberg Holdco Ii As ENERGY J. Meyer / B. Engebretsen Billerudkorsnas Ab MATERIALS M. Rosendal / L. Landeman MARKETWEIGHT Bonum Pankki Oyj BBB Stable BANKS K. Jensen / G. Bergin Carlsberg Breweries A/S Baa2 Stable BBB Stable CONSUMER GOODS B. Børsting / M. Rosendal MARKETWEIGHT Caruna Networks Oy BBB+ Stable UTILITIES J.Magnussen / L.Landeman OVERWEIGHT Castellum Ab REAL ESTATE L. Landeman / G. Bergin OVERWEIGHT Citycon Oyj BBB Stable Baa1 Stable REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Color Group As TRANSPORTATION B. Børsting / M. Rosendal MARKETWEIGHT Com Hem Holding Ab BB Stable TMT M. Rosendal / J. Magnussen OVERWEIGHT Corem Property Group Ab REAL ESTATE L. Landeman / G. Bergin UNDERWEIGHT Danfoss A/S BBB Stable MACHINERY & HEAVY INDUSTRIALS B. Børsting / J. Magnussen MARKETWEIGHT Destia Group Oy CONSTRUCTION A. Moberg / L. Landeman OVERWEIGHT Dfds A/S SHIPPING B. Børsting / M. Rosendal OVERWEIGHT Dlg Finance As CONSUMER GOODS M. Rosendal / B. Børsting Dna Ltd TMT M. Rosendal / J. Magnussen OVERWEIGHT Dnb Bank Asa A+ Neg Aa2 Neg BANKS K. Jensen / G. Bergin UNDERWEIGHT Dong Energy A/S BBB+ Stable Baa1 Neg BBB+ Stable UTILITIES J. Magnussen / L. Landeman MARKETWEIGHT Dsv A/S TRANSPORTATION B. Børsting / M. Rosendal OVERWEIGHT Eg Holding SERVICES & IT J. Magnussen / B. Børsting Eika Boligkreditt As BANKS K. Jensen / G. Bergin Eika Forsikring As INSURANCE K. Jensen / G. Bergin Eika Gruppen As FINANCIALS K. Jensen / G. Bergin Source: Standard & Poor's, Moody's, Fitch, Danske Bank Markets 25

26 Our coverage 2 of 5 Ratings from S&P/Moody's/Fitch S&P Moody's Fitch Sector Analyst(s) Recomm. Company Rating Outlook Rating Outlook Rating Outlook Ellevio Ab UTILITIES J.Magnussen / L.Landeman Electrolux Ab A- Stable Wr WD CONSUMER GOODS A. Moberg / G. Bergin MARKETWEIGHT Elenia Oy BBB UTILITIES J. Magnussen / L. Landeman MARKETWEIGHT Elisa Oyj BBB+ Stable Baa2 Stable TMT M. Rosendal / J. Magnussen MARKETWEIGHT Entra Asa REAL ESTATE H. Syed/ B. Engebretsen MARKETWEIGHT Fastpartner Ab REAL ESTATE L. Landeman / G. Bergin OVERWEIGHT Felleskjopet Agri Sa CONSUMER GOODS B. Børsting / M. Rosendal Fingrid Oyj AA- Stable A1 Pos AA- Stable UTILITIES J. Magnussen / L. Landeman OVERWEIGHT Finnair Oyj TRANSPORTATION B. Børsting / M. Rosendal MARKETWEIGHT Fortum Oyj BBB+ Stable Baa1 Stable BBB+ Stable UTILITIES J. Magnussen / L. Landeman UNDERWEIGHT Fortum Varme Holding Samagt MBBB+ Stable UTILITIES J. Magnussen / L. Landeman MARKETWEIGHT G4S Plc BBB- Neg SERVICES & IT B. Børsting / M. Rosendal MARKETWEIGHT Gaslog Ltd SHIPPING J. Meyer / B. Engebretsen MARKETWEIGHT Getinge Ab HEALTHCARE A. Moberg / L. Landeman UNDERWEIGHT Golar Lng Partners Lp SHIPPING J. Meyer / B. Engebretsen Heimstaden Ab REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Hemso Fastighets Ab A- Stable REAL ESTATE L. Landeman / G. Bergin Hexagon Ab MACHINERY & HEAVY INDUSTRIALS A. Moberg / L. Landeman MARKETWEIGHT Hkscan Oyj CONSUMER GOODS M. Rosendal / B. Børsting MARKETWEIGHT Hoegh Lng Holdings Ltd SHIPPING J. Meyer / B. Engebretsen Hoist Kredit Ab Ba1 Stable BANKS G. Bergin / L. Landeman MARKETWEIGHT Husqvarna Ab BBB Stable CONSUMER GOODS A. Moberg / L. Landeman MARKETWEIGHT Ica Gruppen Ab CONSUMER GOODS A. Moberg / G. Bergin MARKETWEIGHT If P&C Insurance Holding Ltd A- Stable INSURANCE K. Jensen / G. Bergin Ikano Bank Ab BANKS K. Jensen / G. Bergin Investor Ab AA- Stable Aa3 Stable CORPORATES G. Bergin / B. Børsting OVERWEIGHT Iss A/S BBB Stable SERVICES & IT B. Børsting / M. Rosendal OVERWEIGHT J Lauritzen A/S SHIPPING J. Meyer / B. Engebretsen Jefast Holding Ab REAL ESTATE L. Landeman / G. Bergin OVERWEIGHT Jernhusen Ab REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Jyske Bank A/S A- Stable Baa1U Stable BANKS K. Jensen / G. Bergin OVERWEIGHT Kemira Oyj Wr MATERIALS M. Rosendal / L. Landeman OVERWEIGHT Kesko Oyj CONSUMER GOODS B. Børsting / G. Bergin OVERWEIGHT Source: Standard & Poor's, Moody's, Fitch, Danske Bank Markets 26

27 Our coverage 3 of 5 Ratings from S&P/Moody's/Fitch S&P Moody's Fitch Sector Analyst(s) Recomm. Company Rating Outlook Rating Outlook Rating Outlook Klaveness Ship Holding As SHIPPING J. Meyer / B. Engebretsen Klovern Ab REAL ESTATE L. Landeman / G. Bergin UNDERWEIGHT Kungsleden Ab REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Lantmannen Ek For CONSUMER GOODS A. Moberg / G. Bergin MARKETWEIGHT Loomis Ab SERVICES & IT B. Børsting / M. Rosendal Luossavaara-Kiirunavaara Ab MATERIALS L. Landeman / G. Bergin MARKETWEIGHT Meda Ab HEALTHCARE L. Landeman / G. Bergin Metsa Board Oyj BB+ Pos Ba2 Stable MATERIALS M. Rosendal / L. Landeman MARKETWEIGHT Metso Oyj BBB Stable Baa2 Stable MACHINERY & HEAVY INDUSTRIALS B. Børsting / M. Rosendal OVERWEIGHT Ncc Ab CONSTRUCTION A. Moberg / L. Landeman MARKETWEIGHT Neste Oyj ENERGY J. Magnussen / L. Landeman MARKETWEIGHT Nibe Industrier Ab MACHINERY & HEAVY INDUSTRIALS A. Moberg / L. Landeman MARKETWEIGHT Nokia Oyj BB+ Stable Ba1 Stable BB+ Pos TMT M. Rosendal / J. Magnussen MARKETWEIGHT Nordax Bank Ab BANKS K. Jensen / G. Bergin Nordea Bank Ab AA- Neg Aa3 Stable AA- Stable BANKS K. Jensen / G. Bergin MARKETWEIGHT Norwegian Air Shuttle Asa TRANSPORTATION B. Børsting / M. Rosendal MARKETWEIGHT Norwegian Property Asa REAL ESTATE H. Syed/ B. Engebretsen MARKETWEIGHT Nykredit Bank A/S A Stable Baa3U Stable A Stable BANKS K. Jensen / G. Bergin MARKETWEIGHT Nynas Group ENERGY J. Magnussen / L. Landeman OVERWEIGHT Obos Bbl REAL ESTATE H. Syed/ B. Engebretsen MARKETWEIGHT Odfjell Se SHIPPING J. Meyer / B. Engebretsen Olav Thon Eiendomsselskap Asa REAL ESTATE H. Syed/ B. Engebretsen OVERWEIGHT Op Corporate Bank Plc AA- Stable Aa3 Stable WD BANKS K. Jensen / G. Bergin OVERWEIGHT Orkla Asa CONSUMER GOODS H. Syed/ B. Engebretsen MARKETWEIGHT Outokumpu Oyj B3 Pos MATERIALS M. Rosendal / L. Landeman OVERWEIGHT Postnord Ab TRANSPORTATION G. Bergin / L. Landeman UNDERWEIGHT Ramirent Oyj CONSTRUCTION J. Magnussen / B. Børsting Saab Ab Wr MACHINERY & HEAVY INDUSTRIALS A. Moberg / G. Bergin OVERWEIGHT Sandvik Ab BBB Pos MACHINERY & HEAVY INDUSTRIALS B. Børsting / M. Rosendal OVERWEIGHT Sas Ab B Stable Wr Stable TRANSPORTATION B. Børsting / M. Rosendal OVERWEIGHT Sbab Bank Ab A Neg A2 Pos BANKS K. Jensen / G. Bergin MARKETWEIGHT Securitas Ab BBB Stable Wr SERVICES & IT B. Børsting / M. Rosendal MARKETWEIGHT Source: Standard & Poor's, Moody's, Fitch, Danske Bank Markets 27

28 Our coverage 4 of 5 Ratings from S&P/Moody's/Fitch S&P Moody's Fitch Sector Analyst(s) Recomm. Company Rating Outlook Rating Outlook Rating Outlook Ship Finance International Ltd Wr SHIPPING J. Meyer / B. Engebretsen OVERWEIGHT Skandinaviska Enskilda Banken AA+ Stable Aa3 Stable AA- Stable BANKS K. Jensen / G. Bergin MARKETWEIGHT Skanska Ab CONSTRUCTION L. Landeman / G. Bergin Skf Ab BBB- Stable Baa2 Stable MACHINERY & HEAVY INDUSTRIALS B. Børsting / M. Rosendal UNDERWEIGHT Sognekraft As UTILITIES J. Magnussen / L. Landeman Spar Nord Bank A/S BANKS K. Jensen / G. Bergin Sparbanken Skane Ab A- Neg BANKS K. Jensen / G. Bergin Sparebank 1 Boligkreditt As BANKS K. Jensen / G. Bergin Sparebank 1 Nord Norge A1 Stable A Stable BANKS K. Jensen / G. Bergin MARKETWEIGHT Sparebank 1 Smn A1 Stable A- Stable BANKS K. Jensen / G. Bergin UNDERWEIGHT Sparebank 1 Sr-Bank Asa A1 Neg A- Stable BANKS K. Jensen / G. Bergin UNDERWEIGHT Sparekassen Kronjylland BANKS K. Jensen / G. Bergin Sponda Oyj REAL ESTATE L. Landeman / G. Bergin OVERWEIGHT Srv Group Oyj REAL ESTATE A. Moberg / L. Landeman MARKETWEIGHT Ssab Ab B+ Stable MATERIALS M. Rosendal / L. Landeman OVERWEIGHT St1 Nordic Oy ENERGY J. Magnussen / L. Landeman OVERWEIGHT Statkraft Sf A- Neg Aaa Stable UTILITIES J. Magnussen / L. Landeman MARKETWEIGHT Statnett Sf A+ Stable Wr Stable UTILITIES J. Magnussen / L. Landeman MARKETWEIGHT Statoil Asa A+ Stable Aa3 Stable ENERGY J. Magnussen / L. Landeman UNDERWEIGHT Steen & Strøm As REAL ESTATE H. Syed/ B. Engebretsen OVERWEIGHT Stena Ab BB- Neg B3 Stable TRANSPORTATION B. Børsting / M. Rosendal UNDERWEIGHT Stockmann Oyj Abp CONSUMER GOODS M. Rosendal / G. Bergin MARKETWEIGHT Stolt-Nielsen Ltd SHIPPING J. Meyer / B. Engebretsen Stora Enso Oyj BB Pos Ba2 Pos WD MATERIALS M. Rosendal / L. Landeman MARKETWEIGHT Storebrand Bank Asa BBB+ Stable Nr BANKS K. Jensen / G. Bergin Storebrand Livsforsikring As BBB+ Stable Baa1 Stable INSURANCE K. Jensen / G. Bergin Sunnfjord Energi As UTILITIES J. Magnussen / L. Landeman Suomen Hypoteekkiyhdistys BBB Stable BANKS K. Jensen / G. Bergin Svenska Cellulosa Ab Sca BBB Baa1 Stable CONSUMER GOODS M. Rosendal / B. Børsting OVERWEIGHT Svenska Handelsbanken Ab AA- Neg Aa2 Stable AA Stable BANKS K. Jensen / G. Bergin MARKETWEIGHT Swedavia Ab TRANSPORTATION L. Landeman / G. Bergin MARKETWEIGHT Swedbank Ab AA- Neg Aa3 Stable AA- Stable BANKS K. Jensen / G. Bergin MARKETWEIGHT Source: Standard & Poor's, Moody's, Fitch, Danske Bank Markets 28

29 Our coverage 5 of 5 Ratings from S&P/Moody's/Fitch S&P Moody's Fitch Sector Analyst(s) Recomm. Company Rating Outlook Rating Outlook Rating Outlook Swedish Match Ab BBB Stable Baa2 Stable CONSUMER GOODS A. Moberg / B. Børsting OVERWEIGHT Sydbank A/S Baa1 Stable BANKS K. Jensen / G. Bergin OVERWEIGHT Tallink Grupp As TRANSPORTATION B. Børsting / J. Magnussen Tdc A/S BBB- Stable Baa3 Stable BBB- Stable TMT M. Rosendal / J. Magnussen MARKETWEIGHT Technopolis Oyj REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Teekay Lng Partners Lp SHIPPING J. Meyer / B. Engebretsen Tele2 Ab TMT M. Rosendal / J. Magnussen OVERWEIGHT Telefonaktiebolaget Lm Ericsson BBB Neg Baa3 Neg BBB+ Neg TMT M. Rosendal / J. Magnussen UNDERWEIGHT Telenor Asa A Stable A3 Stable TMT M. Rosendal / J. Magnussen MARKETWEIGHT Telia Co Ab A- Baa1 Stable A- Stable TMT M. Rosendal / J. Magnussen UNDERWEIGHT Teollisuuden Voima Oyj BB+ Stable Wr BBB Neg UTILITIES J. Magnussen / L. Landeman OVERWEIGHT Thon Holding As REAL ESTATE H. Syed/ B. Engebretsen OVERWEIGHT Topdanmark A/S INSURANCE K. Jensen / G. Bergin Tryg Forsikring A/S INSURANCE K. Jensen / G. Bergin Upm-Kymmene Oyj BBB- Pos Baa3 Stable WD MATERIALS M. Rosendal / L. Landeman OVERWEIGHT Vasakronan Ab REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Vattenfall Ab BBB+ Neg A3 Neg BBB+ Stable UTILITIES J. Magnussen / L. Landeman MARKETWEIGHT Vestas Wind Systems A/S MACHINERY & HEAVY INDUSTRIALS J. Magnussen / M. Rosendal OVERWEIGHT Victoria Park Ab REAL ESTATE L. Landeman / G. Bergin OVERWEIGHT Volvo Ab BBB Pos Baa2 Stable BBB Stable MACHINERY & HEAVY INDUSTRIALS A. Moberg / M. Rosendal MARKETWEIGHT Wihlborgs Fastigheter Ab REAL ESTATE L. Landeman / G. Bergin MARKETWEIGHT Wilh Wilhelmsen Asa SHIPPING J. Meyer / B. Engebretsen Yit Oyj CONSTRUCTION A. Moberg / L. Landeman MARKETWEIGHT Source: Standard & Poor's, Moody's, Fitch, Danske Bank Markets 29

30 Fixed Income Credit Research team Thomas Hovard Head of Credit Research Henrik René Andresen Credit Portfolios Gabriel Bergin Strategy, Financials gabe@danskebank.com Brian Børsting Industrials brbr@danskebank.com Bendik Engebretsen Industrials bee@danskebank.com Katrine Jensen Financials katri@danskebank.com Louis Landeman Industrials, Real Estate llan@danskebank.com Jakob Magnussen Utilities, Energy jakja@danskebank.com Jonas Meyer Shipping mey@danskebank.com August Moberg Industrials & Construction aumo@danskebank.com Niklas Ripa Credit Portfolios niri@danskebank.com Mads Rosendal Industrials, TMT madro@danskebank.com Haseeb Syed Industrials hsy@danskebank.com Find the latest Credit Research: : Danske Bank Markets: Bloomberg: DNSK<GO> 30

31 Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ('Danske Bank'). The author of this research report is Henrik René Andresen, Analyst. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. Danske Bank s research reports are prepared in accordance with the recommendations of the Danish Securities Dealers Association. Danske Bank is not registered as a Credit Rating Agency pursuant to the CRA Regulation (Regulation (EC) no. 1060/2009); hence, Danske Bank does not comply with nor seek to comply with the requirements applicable to Credit Rating Agencies. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment management, investment banking, custody and other financial services activities, may be a lender to the companies mentioned in this publication and have whatever rights are available to a creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit or other information regarding the companies mentioned in this publication that is not available to or may not be used by the personnel responsible for the preparation of this report, which might affect the analysis and opinions expressed in this research report. 31

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