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Investment Research

Headlines

‘The hunt for yield’ is still the main theme on the credit markets

The Bank For International Settlements (‘BIS’) warns of low interest rates

Strong job report from the US puts pressure on the Fed

The ECB leaves rates unchanged

Market commentary

As we enter the second half of 2014 – the overall theme on the credit markets continues

to be ‘the hunt for yield’. Volatility in equity, fixed income and currency markets is

approaching all-time lows, reflecting that investors are pricing in very little risk for most

asset classes. This strong risk sentiment is mainly fuelled and driven by money printing

and record low interest rates in most OECD countries, as most recently illustrated by

Spain issuing a 30-year government bond with the lowest yield since 2006.

This is starting to raise concerns. In its latest annual report published this week, BIS

warned of low interest policies generating an environment for financial bubbles, which

could start a global financial crisis that may be worse than the first and urging its

members to raise interest rates on the back of the recent upturn in the world economy. In

contrast to the BIS statement, Ms Yellen this week publicly defended the Fed’s decision

to maintain an expansive monetary policy despite improving economic data and record

high asset prices within almost all types of assets. Instead, the Fed is concentrating on

comprehensive regulation on banks, arguing that bolstering the sector’s resilience will

enable it to withstand unexpected negative developments in the financial markets and thus

making identification of financial bubbles less critical.

Selected new issues

Name Rating Coupon Currency Tenor Size Spread*

Hera SPA // 2.375% EUR 10Y 500m 119.4** Bayer AG (3.25bn dual) /Baa2/ 3.0% EUR 60Y 1.75bn 258.6** Accor BB//BBe 4.125% EUR Perp. 900m 340.2 Wind ACQ BB/Ba3/ 4.0% EUR 6Y 2.1bn 346** Polarcus Ltd // N+725 NOK 5Y 350m 725 Bonheur ASA // N+310 NOK 5Y 900m 310 Bonheur ASA // N+350 NOK 7Y 600m 350 Crayon Group Holding // N+500 NOK 3Y 650m 500

Note: Ratings are senior unsecured ratings from S&P/Moody's/Fitch

* Mid-swap for fixed, discount margin for FRNs

** Spread over Bunds (DBR11/2

05/15/24; DBR31/4

01/04/20; DBR3 07/04/20)

Source: Bloomberg, Danske Bank Markets

4 July 2014

Analyst Henrik René Andresen +45 45 13 33 27 [email protected]

Weekly Credit Update

Contents

Market commentary 1

Selected charts 3

Recently published research 5

Official and shadow ratings 6

iTraxx Europe (investment grade)


iTraxx Crossover (high yield)


2 | 4 July 2014 www.danskeresearch.com

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According to the Financial Times, at the same time Ms Yellen also stated, ‘for example,

corporate bonds spreads, as well as indications of expected volatility in some asset

markets, have fallen to low levels, suggesting that some investors may under appreciate

the potential for losses and volatility going forward’, thereby acknowledging that some

mispricing of financial assets is currently taking place.

However, with the latest very strong non-farm payrolls data sending Dow Jones for the

time above 17,000 and the yield on two-year notes to the highest level since September

2013, the time might have come when the Fed will have to scale back on its asset

purchase programme as well as raise short-term interest rates this year and not in 2015 as

most market participants currently expect. Not only did the job data significantly exceed

market expectations but the underlying data pointed towards a strengthening in the overall

US economy, putting further pressure on the Fed – especially if the July job data points in

the same direction as that in June.

On this side of the Atlantic, the ECB left rates unchanged. This was slightly surprising

given the announcement in June to cut the main interest rates below zero and to set up

longer-term refinancing operations, where banks will be able to lend up to EUR400bn to

combat the ‘deflation ghost’ and the disappointing economic data from the euro zone

released earlier this week.


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EUR investment-grade cash spreads (ASW) EUR high-yield cash spreads (ASW)

Source: Danske Bank Markets Source: Danske Bank Markets

iTraxx (Europe) vs CDX (US) Investment grade corporate yields


Nordic corporates vs iTraxx Nordic banks 5Y CDS spreads



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Corporate BBB bond yield vs EuroSTOXX dividend yield 3M Libor OIS spreads


Financials spread vs non-financials (Industrials), A-rated

Source: Danske Bank Markets


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Recently published research

Credit Update – Norwegian utilities 2014

This document provided an update on the Norwegian utilities sector. This included price

dynamics, ownership structures, a description of business areas and company descriptions

for the larger Norwegian utilities players. We also updated our indicative ratings on these

companies. Generally, credit quality is still on a deteriorating path on the back of a still

tough earnings environment and high capex.

Issuer profile on Posten Norge AS

We assign an ‘A-’ issuer rating to Posten Norge AS. The rating is based on Posten’s

position as the national mail service operator in Norway with strong ties to the Norwegian

government, its extensive Nordic logistics operations and conservative financial policies.

Weighing on the rating consideration are challenging market conditions within both Mail

and Logistics, which demand continued transformation of Posten’s services as well as a

strong cost focus. Posten’s rating is contingent on a continuation of the Norwegian

government’s long-term, supportive ownership policy.

http://danskeresearch.danskebank.com/link/NorwegianUtilities250614/$file/Norwegian_Utilities_250614.pdf

http://danskeresearch.danskebank.com/abo/IssuerProfilePostenNorge250614/$file/IssuerProfile_PostenNorge_250614.pdf


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Ratings from Standard & Poor’s, Moody’s and Fitch and Danske Bank markets shadow ratings

Source: Standard & Poor’s, Moody’s, Fitch, Danske Bank Markets

Analyst(s)

Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating OutlookAkelius Residential Ab BB+ Pos BB Louis LandemanAmbu A/S BBB- Stable Jakob MagnussenAp Moeller - Maersk A/S BBB+ Stable Baa1 Stable Brian Børsting BUYArla Foods Amba BBB+ Stable Mads RosendalAtlas Copco Ab A Stable A2 Stable Mads Rosendal SELLAvinor As AA- Stable A1 Stable Åse Haagensen HOLDBank 1 Oslo Akershus As BBB+ Stable T. Hovard / L. HolmBwg Homes Asa BB Stable BB- Nils AspeliCargotec Oyj BBB- Stable Kasper F. LarsenCarlsberg Breweries A/S Baa2 Stable BBB Stable Brian Børsting SELLCermaq Asa BB Stable Knut-Ivar BakkenColor Group As BB- Stable B+ Kasper F. LarsenDanske Bank A/S A Neg Baa1 Pos A StableDlg Finance As BB- Stable Mads RosendalDfds A/S BB+ Stable Kasper F. LarsenDna Ltd BBB- Stable Kasper F. LarsenDnb Bank Asa A+ Stable A1 Neg T. Hovard / L. Holm HOLDDong Energy A/S BBB+ Stable Baa1 Stable BBB+ Stable Jakob Magnussen BUYDsv A/S BBB Stable Brian BørstingEg Holding B Stable Jakob MagnussenEika Boligkreditt As A- Stable Nils AspeliEika Gruppen As BBB Stable Nils AspeliElectrolux Ab BBB+ Neg Wr WD Brian Børsting HOLDElisa Oyj BBB Pos Baa2 Stable Kasper F. Larsen BUYEntra Eiendom As A- Stable Nils AspeliFinnair Oyj BB Stable Brian BørstingFingrid Oyj AA- Neg A1 Stable A+ Stable Jakob Magnussen BUYFortum Oyj A- Neg A2 Neg A- Neg Jakob Magnussen SELLFred Olsen Energy Asa BB+ Stable Sondre StormyrG4S Plc BBB- Stable Brian Børsting BUYGetinge Ab BBB- Neg Louis LandemanHelgeland Sparebank Baa2 Neg T. Hovard / L. HolmHemso Fastighets Ab BBB+ Stable Wiveca SwartingHusqvarna Ab BBB- Stable Louis LandemanInvestor Ab AA- Stable A1 Stable Brian Børsting BUYIss A/S BBB- Stable Baa3 Stable Brian Børsting HOLDJernhusen Ab A- Stable Gabriel BerginJ Lauritzen A/S B Stable B- Åse HaagensenJyske Bank A/S A- Stable Baa1 Neg Thomas M. Hovard BUYKesko Oyj BBB Stable Mads RosendalKlaveness Ship Holding As BB- Stable B+ Bjørn Kristian RøedMeda Ab BB Pos Louis LandemanMetsa Board Oyj B+ Stable B2 Pos Mads RosendalMetso Oyj BBB Stable Baa2 Neg Mads Rosendal BUYMjolby-Svartadalen Energi Ab BBB+ Watch Louis LandemanNcc Ab BBB- Stable Louis LandemanNeste Oil Oyj BBB- Stable Jakob Magnussen HOLDNokia Oyj BB Pos Ba2 Stable BB Stable Kasper F. Larsen HOLDNokian Renkaat Oyj A- Stable Jakob MagnussenNordea Bank Ab AA- Neg Aa3 Neg AA- Stable T. Hovard / L. Holm SELLNorth Atlantic Drilling Ltd BB Stable BB- Sondre StormyrNorwegian Property Asa BBB- Stable Nils AspeliNykredit Bank A/S A+ Neg Baa2U Stable A Stable T. Hovard / L. Holm BUYOdfjell Se B+ Stable B Bjørn Kristian RøedOlav Thon Eiendomsselskap Asa BBB+ Stable Nils AspeliOlympic Shipping As B+ Stable B Åse HaagensenOutokumpu Oyj B- Pos Mads RosendalOrkla Asa BBB+ Pos Nils AspeliPohjola Bank Plc AA- Neg Aa3 Neg A+ Stable T. Hovard / L. Holm SELLPostnord Ab BBB+ Stable Gabriel BerginProsafe Se BB Stable Åse HaagensenRamirent Oyj BB+ Stable Brian BørstingSaab Ab BBB+ Stable Wr Wiveca SwartingSampo Baa2 Stable T. Hovard / L. Holm HOLDSandnes Sparebank BBB+ Stable T. Hovard / L. Holm HOLDSandvik Ab BBB Stable Mads Rosendal HOLDSas Ab B- Stable Wr Pos Brian BørstingSbab Bank Ab A Neg A2 Neg T. Hovard / L. Holm HOLDScania Ab A- Pos Mads Rosendal HOLDSchibsted Asa BBB Stable Nils AspeliSeadrill Ltd BB+ Stable BB Sondre Stormyr

S&P Moody's FitchDanske Bank Recomm.


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Ratings from Standard & Poor’s, Moody’s and Fitch and Danske Bank markets shadow ratings

Source: Standard & Poor’s, Moody’s, Fitch, Danske Bank Markets

Analyst(s)

Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating OutlookSecuritas Ab BBB Stable Wr Brian Børsting HOLDSkandinaviska Enskilda Banken Ab A+ Neg A1 Neg A+ Stable T. Hovard / L. Holm BUYSkanska Ab BBB+ Stable Louis LandemanSkf Ab BBB+ Stable Baa1 Stable Mads Rosendal BUYSolstad Offshore Asa BB- Stable B+ Åse HaagensenSparebank 1 Nord Norge A2 Neg A Stable T. Hovard / L. Holm HOLDSparebank 1 Smn A2 Neg A- Stable T. Hovard / L. Holm HOLDSparebank 1 Sr Bank Asa A2 Neg A- Stable T. Hovard / L. Holm HOLDSpar Nord Bank A/S BBB+ Stable T. Hovard / L. HolmSponda Oyj BBB- Stable Louis LandemanStatkraft Sf A- Stable Aaa Stable Jakob Magnussen BUYStatnett Sf A+ Stable Wr Stable Jakob Magnussen HOLDStatoil Asa AA- Stable Aa2 Stable Jakob Magnussen SELLStena Ab BB Stable B2 Stable Brian Børsting BUYStockmann Oyj Abp BB- Neg Mads RosendalStolt-Nielsen Ltd BB+ Stable BB Bjørn Kristian RøedStora Enso Oyj BB Stable Ba2 Neg BB- Stable Mads Rosendal HOLDSuomen Hypoteekkiyhdistys A- Stable T. Hovard / L. HolmSwedavia Ab A- Stable Gabriel BerginSwedbank Ab A+ Neg A1 Neg A+ Stable T. Hovard / L. Holm BUYSwedish Match Ab BBB Stable Baa2 Stable Brian Børsting HOLDSvenska Cellulosa Ab Sca A- Stable Baa1 Stable Mads Rosendal SELLSvensk Fastighetsfinansiering Ab BBB Stable Louis LandemanSvenska Handelsbanken Ab AA- Neg Aa3 Neg AA- Stable T. Hovard / L. Holm HOLDSydbank A/S Baa1 Neg T. Hovard / L. Holm HOLDTallink Group As BB Stable BB- Jakob MagnussenTalvivaara Mining Co Plc C Mads RosendalTdc A/S BBB Stable Baa2 Stable BBB Stable Kasper F. Larsen HOLDTeekay Offshore Partners Lp BB- Stable B+ Kasper F. LarsenTele2 Ab BBB Stable Kasper F. LarsenTelefonaktiebolaget Lm Ericsson BBB+ Neg Baa1 Stable BBB+ Neg Kasper F. Larsen HOLDTelenor Asa A- Pos A3 Stable Kasper F. Larsen HOLDTeliasonera Ab A- Stable A3 Stable A- Stable Kasper F. Larsen SELLTeollisuuden Voima Oyj BBB Neg Wr BBB Stable Jakob Magnussen BUYThon Holding As BBB+ Stable Nils AspeliUpm-Kymmene Oyj BB Pos Ba1 Stable BB Stable Mads Rosendal HOLDVasakronan Ab BBB+ Stable Louis LandemanVattenfall Ab A- Stable A3 Stable A- Neg Jakob Magnussen HOLDVestas Wind Systems A/S BBB- Pos Kasper F. Larsen BUYVolvo Ab BBB Neg Baa2 Neg BBB Stable Mads Rosendal BUYWilh Wilhelmsen Asa BBB- Stable Bjørn Kristian RøedYit Oyj B+ Neg Louis Landeman

Danske Bank S&P Moody's Fitch Recomm.


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Henrik René Andresen

Credit Portfolios (+45) 45 13 33 27 [email protected]

Brian Børsting

Industrials (+45) 45 12 85 19 [email protected]

Mads Rosendal

Industrials, Pulp & Paper (+45) 45 14 88 79 [email protected]

Lars Holm

Financials (+45) 45 12 80 41 [email protected]

Jakob Magnussen

Utilities, Energy (+45) 45 12 85 03 [email protected]

Åse Haagensen

High Yield, Industrials (+47) 22 86 13 22 [email protected]

Fixed Income Credit Research

Louis Landeman

TMT, Industrials (+46) 8 568 80524 [email protected]

Thomas Hovard

Head of Credit Research (+45) 45 12 85 05

[email protected]

Find the latest Credit Research

Danske Bank Markets: Bloomberg: http://www.danskebank.com/danskemarketsresearch DNSK<GO>

Gabriel Bergin

Strategy, Industrials (+46) 8 568 80602 [email protected]

Kasper From Larsen

High Yield, TMT (+45) 45 12 80 47 [email protected]

Bjørn Kristian Røed

Shipping (+47) 85 40 70 72 [email protected]

Nils Henrik Aspeli

Real Estate, Industrials (+47) 85408433 [email protected]

Wiveca Swarting

Real Estate, Construction (+46) 8 568 80617 [email protected]

Sondre Dale Stormyr

Offshore rigs (+47) 85 40 70 70 [email protected]

Øyvind Mossige

Oil services (+47) 85 40 54 91 [email protected]

mailto:[email protected]








http://www.danskebank.com/danskemarketsresearch









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