weekly credit update - microsoft...weekly credit update important disclosures and certifications are...

1 December 2015

Weekly Credit Update

Important disclosures and certifications are contained from page 34 of this report

Analysts Henrik René Andresen

+45 45 13 33 27 [email protected]

Katrine Jensen +45 45 12 80 56 [email protected]

Investment Research www.danskebank.com/CI

mailto:[email protected]

mailto:[email protected]

2

- General credit market news and current themes

- Credit indicators

- Scandi Investment Grade

Contents

- Coverage universe, credit ratings and recommendations

- Scandi High Yield

3

Sources: Bloomberg, Danske Bank Markets (both charts)

What’s on our mind - General credit market news

• Last week the European credit market moved more or less sideways. iTraxx Main was unchanged at 72bp, while iTraxx Crossover widened marginally to 292bp. • It was a fairly quiet week on the Scandinavian credit markets, with low new issuance activity and little company specific news. We saw issuance from the Swedish real estate company Jernhusen AB and the Swedish industrial company NIBE Industrier AB, printing a 3-year SEK300m with a coupon of 0.61% p.a. and a 3.5-year SEK400m 3M Stibor +120bp, respectively. On Friday, Standard & Poor’s downgraded TDC from BBB to BBB-. At the same time the outlook was changed from negative to stable. • The financial markets will be looking forward to Thursday (ECB meeting). We expect it both to lower its deposit rate by 20bp and to extend and enlarge its QE programme. Friday brings the US November jobs report. This will give us our last insight into the current state of the US labour market before the Fed decides whether to hike in December. We expect lower employment growth in November than in October but it would still point to higher interest rates. In addition, this week we will also get the ISM in the US, f lash inflation in Europe and PMI in China.

4

Scandi High Yield

Color Group – trade idea (published 27 October 2015)

We continue to view Color Goup as a B+ credit (bond issue level). We expect stronger future cash flows. Recent significant spread widening presents a buying opportunity for investors able/willing to hold NOK exposure, in our view, given our expectation of better cash flows and a moderately stronger future credit profile. Color Group bonds appear undervalued, while the Tallink bonds appear ‘fairly’ valued on a relative value basis. Of the issued Color Group bonds we prefer the Color Group FRN 2019 NOK bond due to current pricing.

See Trade Idea - Buy Color Group FRN NOK 2019 (OUTRIGHT) or finance purchase by selling Tallink FRN NOK 2018 (SWITCH).

Relative value (EUR), ask spreads Credit spread development

COLLIN 6.44% 2016

COLLIN 5.68% 2017

COLLIN 6.43% 2019 COLLIN 5.98% 2020

DFDSDC 4.1% 2018

DFDSDC 1.63% 2019

DFDSDC 4.78% 2016

TALLNK 6.12% 2018

STENA 6.125% 2017

STENA 5.875% 2019

STENA 7.875% 2020

STENA 5.75% 2024

STENA 7% 2024

MAERSK 3.375% 2019

MAERSK 2.875% 2020

HRGNO 7.5% 2020

DSVDC 3.5% 2020COLLIN 5.97% 2015

Nordic B**

Nordic BB**

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

0 1 2 3 4 5 6 7 8 9

Credit Spreads*

Years to maturity***

* Spreads are swapped to indicated currency and prioritised in accordance with availability of Z-spread, ASW spread, discount margin.** Nordic BB includes BB+/BB/BB- issues and Nordic B includes B+/B/B- issues with spreads below 700bp.*** Years to legal maturity or years to first-call date (shortest used).

300

350

400

450

500

550

600

650

700

apr-2015 maj-2015 jun-2015 jul-2015 aug-2015 sep-2015

ASW Issue Currency

COLLIN NOK 6.43% 2019 HRGNO EUR 7.5% 2022

TALLNK NOK 6.12% 2018

Source: Bloomberg, Danske Bank Markets.

Buy Color Group FRN NOK 2019 (OUTRIGHT) or finance purchase by selling Tallink

FRN NOK 2018 (SWITCH).

http://danskeanalyse.danskebank.dk/abo/ColorGroupSwitchcase271015/$file/Color_Group_Switch_case_271015.pdf








Add 0.9 years of Color Group exposure and earn a 105bp higher discount margin/yield p.a.

Slightly higher credit risk in Color Group than in Tallink.

SELL -

Tallink FRN 2018

BUY –

Color Group FRN 2019 Difference

ISIN: NO0010682255 NO0010657919 -

Currency NOK NOK -

DBM shadow rating `BB-` `B+` -1 notch

Type of instrument Senior unsecured Senior unsecured -

Coupon Type FRN FRN

Coupon 3M NIBOR +500bp 3M NIBOR +525bp -

Maturity October 18, 2018 September 18, 2019

Cash price 101.00 (indicative, bid) 98.50 (indicative, ask) -2.500

Callable Yes, @ at price of 101 in case of change of control

event.

Yes, @ price of100 101 in case of change of control

event.

-

Current YTM 5.75% p.a. 6.80% p.a. +1.05% p.a.

DM +464bp +569bp +105bp

Source: Bloomberg, Danske Bank Markets

Sell FRN Tallink 2018, Buy Color Group FRN 2019

Color Group – trade idea (published 27 October 2015)

7

Source: Danske Bank Markets

Recent trade ideas (high yield)

See the end of this presentation for a list of our coverage including shadow ratings and recommendations

Recent ideas

Type Trade Idea

Opened 27 Oct 2015Start spread 105Opened 27 Oct 2015Start spread 569

Opened 01 Oct 2015

Start spread -27

Opened 01 Oct 2015

Start spread 6

Opened 08 Sep 2015

Start spread 440

Opened 20 Aug 2015

Start spread 37

Opened 16 Jun 2015

Start spread 347

Opened 26 May 2015

Start spread 433

Opened 10 Mar 2015

Start spread -2

Currency trade Close of trade SSAB Recent performance in the SSAB EUR bond has closed the earlier 19bps gap between the EUR and the SEK 2019 bonds.

Outright Buy Destia 2019 In our view the Destia 2019 FRN trades at a fairly attractive spread when compared to our B+ indicative senior unsecured rating. This is in our view most likely a

Outright Buy Volvo 2075 Hybrid The Volvo 4.2% 2075 Hybrid currently trades at attractive levels, in our view, with a pick-up of around 20-25bp to the rating implied spread.

Currency trade Sell SSAB 2019 (SEK) and BUY

SSAB 2019 (EUR)

The spread between the SSAB 2019 (SEK) and SSAB (EUR) 2019 is too wide

Switch Buy Color Group NOK 2019, Sell

Tallink NOK 2018

Color Group spread pick up attractive versus Tallink

Outright

Outright Close of Trade Tallink NOK 2018. Bonds trade tight to `BB-`curve and bonds no longer attractive. We take profit on trade initiated 27 February 2015 (TR: 3.9% / ann. TR 7.9%).

Buy Color Group NOK 2019 Spread wide for the assessed rating

Switch Sell Stena 2020, Buy TDC hybrid Fundamentally, we see increased credit risk in Stena and recommend investors switch into names with same or stronger credit profiles such as TDC (hybrid).

Switch Sell Stena 2020, Buy Volvo

hybrid

Fundamentally, we see increased credit risk in Stena and recommend investors switch into names with same or stronger credit profiles such as Volvo (hybrid).

8

Best and worst performers (Nordic coverage universe) - High yield

Source: Bloomberg, Danske Bank Markets (both charts)

1 month in local currencies YTD in local currencies

2,572

2,115

1,346

1,276

682

670

661

482

448

406

-82

-90

-104

-119

-146

-153

-156

-183

-187

-320

-500050010001500200025003000

Olympic Ship AS NOK 2017

Farstad Shipping ASA NOK 2017



Seadrill Ltd USD 2017

Fred Olsen Energy ASA NOK 2019

Golden Close Maritime Corp Ltd USD …

Solstad Offshore ASA NOK 2019

Seadrill Ltd NOK 2018

Seadrill Ltd SEK 2019

AX IV EG Holding III ApS DKK 2020

Color Group AS NOK 2019

Hoist Kredit AB EUR 2017

Hoist Kredit AB SEK 2016

SAS AB SEK 2019

Prosafe SE NOK 2016

Color Group AS NOK 2017

SAS AB SEK 2017

Beerenberg Holdco II AS NOK 2018

Teekay Offshore Partners LP NOK 2016

Change in local currencies (bp)

266

163

125

122

120

110

47

43

37

35

-85

-109

-114

-136

-145

-148

-181

-353

-462

-604

-800-600-400-2000200400

Golden Close Maritime Corp Ltd USD …

North Atlantic Drilling Ltd USD 2019



Teekay Offshore Partners LP/Teekay …



Seadrill Ltd SEK 2019

YIT OYJ EUR 2016

Outokumpu OYJ EUR 2016


Odfjell SE NOK 2017

SAS AB SEK 2019

Beerenberg Holdco II AS NOK 2018








9

Danske Bank Markets Nordic High-Yield Index Danske Bank Markets Nordic High-Yield Index

Source: Bloomberg, Danske Bank Markets [all tables and charts]

Index sector breakdown Key index statistics

• Spreads in the Nordic High yield secondary markets (measured by our indicative index) were more or less unchanged during the last week.

• We did not see any new issues on the primary Nordic high yield market during last week.

Basic Materials

15%

Communications9%

Consumer, non-cycli.

10%

Energy16%

Diversified4%

Industrial15%

Consumer, Cyclical

6%

Utilities3%

Real estate13%

Technology2%Index start Index end Change

Date 31-dec-2014 20-nov-2015

Yield 4.7%

ASW spread, bps 430 465 35

# Bonds 110

AVG credit rating BB

Avg duration 2.8

TR since start 3.8%

TR YTD 3.8%

TR MTD 0.2%

300

325

350

375

400

425

450

475

500

525

100.0100.5101.0101.5102.0102.5103.0103.5104.0104.5105.0105.5106.0

Dec-2014 Mar-2015 Jun-2015 Sep-2015

DBM Hedged NOK Nordic HY Index ValueDBM Hedged EUR Nordic HY Index ValueDBM Nordic HY Index, ASW-spread (bps). RHS

10


Recent Nordic high-yield issuance Selected new issues (High Yield)

Date Issuer Coupon CCY Volume Maturity S&P / Mdy / Fitch ASW/DM

19/11/2015 Ab Stena Metall Finans STIB3M +350bps SEK 1 000 m Nov/20 / / 350

17/11/2015 Jefast Holding Ab STIB3M +650bps SEK 200 m Jan/19 / / 650

13/11/2015 Vattenfall (hybrid) 6.1% USD 400 m Nov/78 BB+ / Baa2 / A- -

29/10/2015 Marine Harvest Asa (Convertible) 0.125% EUR 340 m Nov/20 / / -

26/10/2015 Ssab Ab STIB3M +250bps SEK 300 m Apr/18 BB- / / 250

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

23/10/2015 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

11


Company news from the past week (high yield) Name News Implication

Höegh LNG

Höegh LNG (BB-/B+) reported Q3 15 EBITDA of USD27m which was largely in line with expectations, with a small negative deviation being related to dry docking of Arctic Lady. Höegh LNG has concluded that certain WHT and VAT in Indonesia (FSRU Lampung) have been incorrectly recorded and that a restatement to historical numbers is required. The net effect of the restatement to the historical figures is a cost of USD6.1m, of which USD4.6m relates to 2014 and USD1.5m to 2013. As a result of this, HLNG has made an indemnification payment to HMLP of c.USD1.2m in the fourth quarter of 2015. Although a negative, this was communicated by the company previously, hence the news is neutral. The company is currently bidding on five FSRUs (has one FSRU on order without a contract) and has a shortlist of an additional five FSRU projects at various stages of development. The liquidity remains solid following the recent equity issue, with its cash balance reaching USD354.5m (up from USD270.9m) which reduced its net debt to USD466m (from USD650m).

Credit neutral

SDRL

SDRL - Adj EBITDA of USD546m better than expected (cons. USD501, DBM USD481m) due to strong cost cutting. A major USD1.8bn non-cash impairment on GW and Seadrill Partner (MLP) is sizeable but not that important. CF and BS a tad better than expected, as is Q4 EBITDA guidance (USD30m down vs. Q3), limited new contract and newbuild-delay flavour in report (likely reflecting that discussion with Petrobras and others are still ongoing). First impression is neutral to slightly positive for the credits.

Credit neutral

12


Company news from the past week (high yield) Name News Implication

Stena

Last Friday Stena (Underweight) delivered its Q3 15 result. In the traditionally seasonally strong third quarter Stena AB reported an group EBITDA of SEK3,440m (+10% y/y). The underlying EBITDA in the Ferry, Shipping and Property segments increased by 5%, 164% and 13% y/y, respectively, driven by increased car/freight volumes, higher crude rates and net valuation gain on properties during the quarter. EBITDA in the Drilling and Adactum segment declined by some 3% and 28%, respectively. The lower earnings in Adactum was due to the earlier sale of the Mediatec companies. No new information was announced as part of the result as regards new oil-rig contracts or how Stena expects to handle the delivery of a new build rig without contract in H2 16. A cost-cutting programme was launched within Drilling. Adj. net debt to Adj. LTM EBITDA decreased slightly to 5.5x in Q3 15 (Q2 15: 5.6x) and Adj. FFO/adj. net debt was unchanged at 12% (vs Q2 15: 12%). Viewed in isolation Stena delivered a strong quarterly result, but we highlight that the outlook for the group over the coming years has deteriorated dramatically in tandem with a significantly declining oil price and cut-backs in exploration capex by the E&P companies. Despite the positive result and currently comfortable liquidity position, we see increased risk of a negative drop in group free cash flows in 2016 and 2017 due to the very harsh market conditions in the oil service business and the significant capex undertakings, meaning group leverage may increase to more than 8x (measured as adj. net / adj. LTM EBITDA) during the next two years. We see heightened credit risk in the name and reiterate our ´Underweight´ recommendation on Stena’s bonds. We regard the pricing of the unsecured Stena AB 2017, 2019 and 2020 bonds as `tight` at present, although such pricing may be justified for the Stena 2017 due to the short time to maturity. To a lesser extent we also regard the pricing of the secured Stena International 5.75% 2024 and the unsecured Stena AB 7% 2024 as `tight` at present. We see further downside in bond valuations in all Stena`s bonds given our view of the group’s deteriorated earnings/cash flow outlook.

Credit neutral

13

Scandi Investment Grade

Trade Idea - Buy DFDS NOK 2016 (published 30 November 2015)

We view DFDS’s credit profile as on par with a ‘BBB-’ shadow rating (bond issue level). DFDS has indicated a willingness to increase leverage significantly if the right acquisition target shows up, possibly to a level of 4-5x net debt / EBITDA vs. current level of 0.9x. From both a relative value and absolute perspective, we believe DFDS FRN 2016 is an attractive alternative to money market investments with similar placement horizon. Contrary to the two other outstanding DFDS bonds, we think the DFDS FRN 2016 is protected from adverse M&A event risk. As an alternative to DFDS FRN 2016, the slightly longer Maersk 6.25% 2016 in NOK seems to offer good value at current pricing. Please also see Credit Update DFDS Q3 15., 19 November 2015

Relative value (NOK), ask spreads

Source: Bloomberg, Danske Bank Markets

MAERSK (Baa1/BBB+)

6.3% '16

DFDSDC (NR/NR) FRN '18

DFDSDC (NR/NR) FRN '16

Industrials BBB's

Industrials BB's

0

25

50

75

100

125

150

175

200

225

0 1 2 3

Credit Spread (NOK)*

Years to maturity**

* Spreads are swapped to indicated currency and prioritised in accordance with availability of Z-spread, discount margin** Years to legal maturity or years to first-call date

Source: Bloomberg, Danske Bank Markets.

BUY –

DFDS 2016

ISIN: NO0010643281

Currency NOK

DBM shadow rating `BBB-`

Type of instrument Senior unsecured

Coupon Type FRN

Coupon 3M NIBOR +350bp

Maturity May 2, 2016

Cash price 101.10 (indicative, ask)

Callable Yes, in case of change of control event.

Current YTM approx. 2.0% p.a.

DM +86bp

http://danskeanalyse.danskebank.dk/abo/CreditUpdateDFDSQ315191115/$file/CreditUpdate_DFDS_Q315_191115.pdf

15


Recent trade ideas (investment grade)

See the end of this presentation for a list of our coverage including shadow ratings and recommendations

Recent ideas

Type Trade Idea

Opened 30 nov 2015

Start spread 86

Opened 16 nov 2015

Start spread 161

Opened 09 nov 2015

Start spread 16Opened 09 nov 2015Start spread 92Opened 24 aug 2015

Start spread 270

Opened 10 aug 2015Start spread 511Opened 10 aug 2015Start spread 361Opened 03 jun 2015

Start spread 32

Outright Close of buy Neste EUR2022 We close our Buy Neste 22's trade recommendation

Outright Buy DFDS NOK FRN 2016 Short FRN trades attractive both on RV and absolute basis.

Switch Buy Securitas EUR 2021, Sell

G4S EUR 2018

One notch higher rating and no risk of near term M&A in Securitas makes pick up attractive.

Outright Buy Securitas EUR 2021 Spread has widened too much post the Diebold acquisition

Outright Buy Vestas 2022 (revisited). The Vestas EUR 2.75% 2022 trades cheap to a EUR corporate BBB. curve.

Outright Buy Nykredit AT1 (perpetual) Nykredit has issued an AT1 with a 7.125% trigger.This hybrid trade attractive to Nordic peers.

Outright Buy Nykredit T2 CoCo first call

2021 (dated)

Nykredit has issued a tier 2 bond as a CoCo with a 7% trigger.We believe the T2 CoCo trades with a discount to peers because of the CoCo feature.

Sector spread Switch from Securitas 2018 to

ISS Global A/S 2020

We recommend to buy the ISS Global A/S 2020 as we believe valuation is attractive compared to ISS Global A/S’ BBB-/Positive Outlook from S&P as the bond is currently trading close to the ‘BBB-’ curve.

16

Best and worst performers (Nordic coverage universe) - Investment grade

Source: Bloomberg, Danske Bank Markets (both charts)

1 week in local currencies 1 month in local currencies

31

18

15

11

10

9

9

8

8

7

-9

-10

-10

-10

-10

-10

-13

-13

-13

-18

-30-20-10010203040

Fortum OYJ EUR 2016

Neste Oyj EUR 2016

Svenska Cellulosa AB SCA EUR 2016

DONG Energy A/S EUR 2016

TeliaSonera AB EUR 2017

Telenor ASA EUR 2017

Telefonaktiebolaget LM Ericsson EUR …

Skandinaviska Enskilda Banken AB EUR …

Svenska Handelsbanken AB EUR 2017

Swedbank AB EUR 2017

Nordea Bank AB EUR 2019

Fortum OYJ EUR 2021

SpareBank 1 SR-Bank ASA EUR 2021

Carlsberg Breweries A/S EUR 2022




SKF AB EUR 2018

Fortum OYJ EUR 2022

SKF AB EUR 2019


6

5

4

3

3

3

3

3

3

2

-4

-4

-5

-5

-5

-6

-6

-7

-8

-10

-15-10-50510

SKF AB EUR 2018

Neste Oyj EUR 2016


SKF AB EUR 2019



Svenska Cellulosa AB SCA EUR 2016

Danske Bank A/S EUR 2017


Fortum OYJ EUR 2016

Vattenfall AB EUR 2024




Statoil ASA EUR 2020


Fortum OYJ EUR 2022





17


Selected new investment-grade issues

Date Issuer Coupon CCY Volume Maturity S&P / Mdy / Fitch ASW/DM

27/11/2015 Jernhusen Ab 0.61% SEK 300 m Dec/18 / / 73

26/11/2015 Swedbank Ab 0.625% EUR 750 m Jan/21 A+ / Aa3e / A+e 53

25/11/2015 Fjellinjen, A/S NIBOR3M +105bps NOK 500 m Dec/20 AA- / / 105

25/11/2015 Crh Funding 1.875% EUR 600 m Jan/24 / Baa2 / 135

25/11/2015 Tafjord Kraft As NIBOR3M +160bps NOK 400 m Nov/18 / / 160

25/11/2015 Hsbc France 0.625% EUR 500 m Dec/20 AA- / A2 / AA- 58

24/11/2015 Skf Ab 1.625% EUR 500 m Dec/22 BBB / Baa1 / 122

24/11/2015 Nibe Industrier Ab STIB3M +120bps SEK 400 m Jun/19 / / 120

23/11/2015 Mastercard Inc 2.1% EUR 800 m Dec/27 A / A2e / 107

23/11/2015 Mastercard Inc 1.1% EUR 700 m Dec/22 A / A2e / 70

23/11/2015 Danone Sa 1.25% EUR 750 m May/24 A- / Baa1 / 67

18


Company news from the past week (investment grade) Name News Implication

TDC

TDC (MW): TDC downgraded by S&P to BBB- (stable) from BBB (negative). The downgrade was largely anticipated as Moody's had already downgraded TDC to Baa3 on the back of the GET acquisition. According to S&P the competitive situation on the Danish market continues to be fierce and a stabilisation in TDC's metrics is taking longer than expected. The stable outlook reflects that the deteriorating market conditions should moderate over the coming two years. Overall slightly credit negative but TDC's longer euro bonds are already trading significantly wider than the BBB- rating would imply, hence downside should be limited on the back of this.

Credit negative

Investor AB

Investor AB (OW) has been upgraded to Aa3 from A1 following increased diversification of its portfolio to less cyclical assets such as pharma. Furthermore Moody's acknowledge Investor's continued track record of maintaining conservative financial metrics and excellent liquidity. Danske comment: Naturally this should support spreads. However, bonds are likely to continue to trade with a discount to the rating as Investor is perceived as a private equity-style company which warrants a discount from a credit investor perspective. We maintain our Overweight recommendation on Investor AB.

Credit positive

DNB

DNB (UW) released its financial ambitions for 2018 on Wednesday in connection with its capital markets day. DNB’s key financial ambitions for 2016-2018 are: ‘Return on equity (ROE): Above 12%, CET1 capital ratio: Minimum 15% as capital level (CET1) as at 31 December 2016, Dividend ambitions: 2015: around 30%, 2016: 30-50% and 2017: >50%, Cost/income ratio: Below 40% towards 2018, DNB will reach the capital requirement of 15 per cent through strong retained earnings and capital efficiency measures. The capital efficiency measures are expect to have a total effect of 80–120 bps from end Q3 2015 to Q4 2016 and include asset disposal/reallocation and financial restructuring. DNB’s capital target for 2017 is about 15.5% and includes a management buffer of approximately 50 bps.’ Our view: sounds ambitious but is in-line with previous communication from the bank. We are pleased with the focus on building up capital in the coming years and see the ambitions as high but reachable. Our main concern with DNB is still the loan losses in the coming period given the slowing Norwegian economy and the risk of a correction in the housing market.

Credit neutral

19


Company news from the past week (investment grade) Name News Implication

Statkraft

Statkraft (OW) will not be reducing its dividend by NOK5bn in the years 2016-2018. This is a backtracking from the plan announced late last year, when the Norwegian government decided to inject NOK5bn in fresh equity into Statkraft and also to reduce dividend distributions by an aggregate amount of NOK5bn in 2016-2018. This is a disappointment from a credit perspective, as the traditionally very supportive Norwegian government, is showing signs that there are limits to their willingness to support. We understand that Statkraft remains committed to their rating target (maintaining current levels) and the group states that today’s decision from the government will force Statkraft to rethink its strategy (which probably means lower capex). Credit negative for Statkraft, but we expect this will be mitigated by lower capex.

Credit negative

20

Credit Indicators

21

Chart pack: euro spreads and returns Euro IG ASW, iBoxx indices

Source: Macrobond Financial, Danske Bank Markets [all charts]

Euro HY ASW, Merrill Lynch indices

IG total return, iBoxx indices, 2014-01=100

HY total return, Merrill Lynch indices, 2014-01=100

22

Chart pack: relative value iTraxx vs iBoxx

Source: Bloomberg, Macrobond Financial, Danske Bank Markets [all charts]

Euro vs US CDS indices - IG (Markit)

EUR CDS spreads – Nordic banks

Euro vs US HY bond indices (Merrill Lynch)

23

Chart pack: general market development European swap and government yields

Source: Macrobond Financial , Danske Bank Markets [all charts]

Euro swap curve spread

3M Libor, US and euro area

EUR/USD basis swaps

24

Chart pack: high-yield funds flow High-yield Europe ETF fund flow

Source: Bloomberg, Danske Bank Markets [all charts]

High yield US ETF fund flow

0

200400600800

1,0001,2001,400

1,6001,8002,000

dec-2014

jan-2015

feb-2015

mar-2015

apr-2015

maj-2015

jun-2015

jul-2015

aug-2015

sep-2015

okt-2015

Cu

mu

lati

ve E

TF

-flo

w M

EU

R

High Yield - Europe - Fixed Income

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

dec-2014

jan-2015

feb-2015

mar-2015

apr-2015

maj-2015

jun-2015

jul-2015

aug-2015

sep-2015

okt-2015

Cu

mu

lati

ve E

TF

-flo

w M

EU

R

High Yield - North America - Fixed Income

25

Chart pack: fund flows Europe, net sales


Sweden, net sales

US, net sales

Norway, net sales

26

Chart pack: macro GDP y/y growth, calendar adjusted


Euro area y/y change in bank lending

Purchasing Manager Indices

Euro area lending standards

27

Coverage universe, credit ratings

and recommendations

28

Our coverage and shadow ratings 1 of 5

Ratings from S&P/Moody's/Fitch and Danske Bank Markets shadow ratings

Analyst(s)

Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating OutlookAhlstrom Oyj BB- Stable M. Rosendal / J. MagnussenAkelius Residential Property Ab BBB- Stable E. Hjalmarsson / L. LandemanAmbu A/S BBB- Stable J. Magnussen / M. RosendalAp Moeller - Maersk A/S BBB+ Stable Baa1 Pos B. Børsting/J. Magnussen MARKETWEIGHTArla Foods Amba BBB Stable M. Rosendal / B. BørstingAtlas Copco Ab A Stable A2 Stable M. Rosendal / E. Hjalmarsson UNDERWEIGHTAvinor As AA- Stable A1 Stable O. Heldal/B. Børsting MARKETWEIGHTBank 1 Oslo Akershus As BBB+ Stable L. Holm / K. JensenBank Norwegian As BBB Stable L. Holm / K. JensenBeerenberg Holdco Ii As B Stable Ø. MossigeBillerudkorsnas Ab BBB- Stable M. Rosendal / L. LandemanBw Offshore BB+ Stable Ø. MossigeCargotec Oyj BBB- Stable M. Rosendal / E. HjalmarssonCarlsberg Breweries A/S Baa2 Neg BBB Stable B. Børsting / M. Rosendal MARKETWEIGHTCermaq Asa BB Stable K. BakkenCitycon Oyj BBB Stable Baa2 Stable E. Hjalmarsson / L. Landeman OVERWEIGHTColor Group As BB- Stable B+ N. Ripa / B. BørstingCom Hem Holding Ab BB- Pos O. Heldal / L. LandemanCorem Property Group Ab BB- Stable B+ E. Hjalmarsson / L. LandemanDanfoss A/S BBB Stable J. Magnussen / B. BørstingDanske Bank A/S A Stable A2 Stable A StableDeep Sea Supply B- Neg I. Båtvik / Ø. MossigeDestia Group Oy BB- Stable B+ M. Rosendal / E. HjalmarssonDfds A/S BBB- Stable N. Ripa / B. BørstingDlg Finance As BB- Stable M. Rosendal / B. BørstingDna Ltd BBB- Stable O. Heldal / L. LandemanDnb Bank Asa A+ Neg Aa3 Stable L. Holm / K. Jensen UNDERWEIGHTDof Asa B+ Neg I. Båtvik/Ø. MossigeDof Subsea B+ Neg I. Båtvik/Ø. MossigeDolphin Geophysical I. BåtvikDong Energy A/S BBB+ Stable Baa1 Stable BBB+ Stable J. Magnussen / L. Landeman MARKETWEIGHTDsv A/S BBB Stable B. Børsting / M. Rosendal

Recomm.Danske Bank S&P Moody's Fitch

29



Analyst(s)

Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating OutlookEg Holding B Stable J. Magnussen / N. RipaEidesvik B Neg I. Båtvik / Ø. MossigeEika Boligkreditt As A- Stable L. Holm / K. JensenEika Gruppen As BBB Stable L. Holm / K. JensenEksportfinans Asa BBB- Pos Ba3 Stable L. Holm / K. JensenElectrolux Ab BBB Stable Wr WD B. Børsting / M. Rosendal MARKETWEIGHTElenia Oy BBB J. Magnussen / L. Landeman OVERWEIGHTElisa Oyj BBB+ Stable Baa2 Stable O. Heldal / L. Landeman MARKETWEIGHTEntra Eiendom As A- Stable O. Heldal / L. LandemanFarstad Shipping Asa BB Neg BB- I. Båtvik / Ø. MossigeFastpartner Ab BB Stable BB- L. Landeman / E. HjalmarssonFingrid Oyj A+ Pos A1 Stable A+ Stable J. Magnussen / L. Landeman MARKETWEIGHTFinnair Oyj BB Stable B. Børsting / M. RosendalFortum Oyj BBB+ Stable Baa1 Stable BBB+ Stable J. Magnussen / L. Landeman UNDERWEIGHTFortum Varme Holding Samagt Med Stockholms Stad Ab BBB+ Stable J. Magnussen / L. LandemanFred Olsen Energy Asa BB- Stable B+ S. Stormyr / B.K. RøedG4S Plc BBB- Stable B. Børsting / M. Rosendal MARKETWEIGHTGetinge Ab BB+ Neg L. Landeman / E. HjalmarssonGolar Lng Partners Lp BB Stable BB- B.K. Røed / J. MeyerGolden Close Maritime Corp Ltd B- S. Stormyr / B.K. RøedHavila CCC+ Neg I. Båtvik / Ø. MossigeHeimstaden Ab BB Stable BB- L. Landeman / E. HjalmarssonHemso Fastighets Ab A- Stable E. Hjalmarsson / L. LandemanHexagon Ab BBB- Stable E. Hjalmarsson / L. LandemanHkscan Oyj BB Stable B. Børsting / M. Rosendal NOT RATEDHoegh Lng Holdings Ltd BB- Stable B+ B.K. Røed / J. MeyerHoist Kredit Ab BB- Stable B+ G. Bergin / L. LandemanHusqvarna Ab BBB- Pos E. Hjalmarsson / L. LandemanIkano Bank Ab BBB Stable L. Holm / K. JensenInvestor Ab AA- Stable Aa3 Stable B. Børsting / M. Rosendal OVERWEIGHTIss A/S BBB- Pos B. Børsting / M. Rosendal OVERWEIGHTJ Lauritzen A/S B Stable B- B.K. Røed / J. MeyerJefast Holding Ab B Stable B E. Hjalmarsson / L. Landeman


30

Our coverage and shadow ratings 3 of 5 Ratings from S&P/Moody's/Fitch and Danske Bank Markets shadow ratings

Analyst(s)

Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating OutlookJernhusen Ab A- Stable E. Hjalmarsson / L. LandemanJyske Bank A/S A- Stable Baa1U Stable L. Holm / K. Jensen OVERWEIGHTKemira Oyj BBB- Stable Wr M. Rosendal / L. Landeman OVERWEIGHTKesko Oyj BBB Stable M. Rosendal / E. HjalmarssonKlaveness Ship Holding As BB- Stable B+ B.K. Røed / J. MeyerLoomis Ab BBB- Stable B. Børsting / M. RosendalLuossavaara-Kiirunavaara Ab BBB Stable L. Landeman / E. HjalmarssonMeda Ab BB- Stable L. Landeman / E. HjalmarssonMetsa Board Oyj BB Stable Ba2 Stable M. Rosendal / E. Hjalmarsson OVERWEIGHTMetso Oyj BBB Stable Baa2 Stable M. Rosendal / L. Landeman MARKETWEIGHTNcc Ab BBB- Stable E. Hjalmarsson / L. LandemanNeste Oyj BBB- Stable J. Magnussen / L. Landeman MARKETWEIGHTNibe Industrier Ab BBB- Stable E. Hjalmarsson / L. LandemanNokia Oyj BB+ Pos Ba2 Stable BB Pos O. Heldal / L. Landeman MARKETWEIGHTNokian Renkaat Oyj BBB+ Stable J. Magnussen / M. RosendalNordax Bank Ab BBB- Stable L. Holm / K. JensenNordea Bank Ab AA- Neg Aa3 Stable AA- Stable L. Holm / K. Jensen UNDERWEIGHTNorth Atlantic Drilling Ltd B+ Neg B S. Stormyr / B.K. RøedNorwegian Air Shuttle Asa BB- Neg B+ B. Børsting / M. RosendalNorwegian Property Asa BBB- Stable O. Heldal / L. LandemanNykredit Bank A/S A Neg Baa3U Stable A Stable L. Holm / K. Jensen OVERWEIGHTNynas Group B+ Stable B+ J. Magnussen / L. LandemanOcean Rig Udw Inc B- Stable Caa3 Neg S. Stormyr / B.K. RøedOcean Yield Asa BB BB- Ø. MossigeOdfjell Se B+ Stable B B.K. Røed / J. MeyerOlav Thon Eiendomsselskap Asa BBB+ Stable O. Heldal / L. LandemanOlympic Ship As B+ Stable B I. Båtvik/Ø. MossigeOrava Residential Reit Plc B+ Stable B+ M. Rosendal / L. LandemanOrkla Asa BBB+ Pos O. Heldal / L. LandemanOutokumpu Oyj B- Neg M. Rosendal / E. HjalmarssonPacific Drilling Sa B- Neg Caa2 Neg S. Stormyr / B.K. RøedPetroleum Geo Services B+ Neg B1 Neg I. Båtvik


31



Analyst(s)

Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating OutlookPohjola Bank Oyj AA- Neg Aa3 Stable A+ Stable L. Holm / K. Jensen MARKETWEIGHTPosten Norge As A- Stable O. Heldal / L. LandemanPostnord Ab BBB+ Stable G. Bergin / L. LandemanProsafe Se BB Stable BB- S. Stormyr / B.K. RøedRamirent Oyj BB+ Stable B. Børsting / M. RosendalRem Offshore B- Neg I. Båtvik / Ø. MossigeSandnes Sparebank BBB+ Stable L. Holm / K. JensenSandvik Ab BBB Neg M. Rosendal / E. Hjalmarsson MARKETWEIGHTSas Ab B- Stable Wr Stable B. Børsting / M. RosendalSbab Bank Ab A Neg A2 Stable L. Holm / K. Jensen MARKETWEIGHTScania Ab A- M. Rosendal / B. Børsting UNDERWEIGHTSchibsted Asa BBB Stable O. Heldal / L. LandemanSeadrill Ltd BB- Stable B+ S. Stormyr / B.K. RøedSecuritas Ab BBB Stable Wr B. Børsting / M. Rosendal MARKETWEIGHTSiem Offshore B- Neg I. Båtvik / Ø. MossigeSkandinaviska Enskilda Banken Ab A+ Neg Aa3 Stable A+ Pos L. Holm / K. Jensen OVERWEIGHTSkanska Ab BBB+ Stable E. Hjalmarsson / L. LandemanSkf Ab BBB Neg Baa1 Neg M. Rosendal / E. Hjalmarsson UNDERWEIGHTSognekraft As BBB Stable BBB J. Magnussen / L. LandemanSolstad Offshore Asa BB- Stable B+ I. Båtvik / Ø. MossigeSpar Nord Bank A/S BBB+ Stable L. Holm / K. JensenSparebank 1 Boligkreditt As A- Stable L. Holm / K. JensenSparebank 1 Nord Norge A1 Stable A Stable L. Holm / K. Jensen UNDERWEIGHTSparebank 1 Smn A1 Stable A- Stable L. Holm / K. Jensen MARKETWEIGHTSparebank 1 Sr-Bank Asa A1 Stable A- Stable L. Holm / K. Jensen UNDERWEIGHTSponda Oyj BBB- Stable E. Hjalmarsson / L. LandemanSsab Ab BB- Stable M. Rosendal / L. Landeman UNDERWEIGHTSt1 Nordic Oy BB Stable J. Magnussen / L. LandemanStatkraft Sf A- Stable Aaa Stable J. Magnussen / L. Landeman OVERWEIGHTStatnett Sf A+ Stable Wr Stable J. Magnussen / L. Landeman MARKETWEIGHTStatoil Asa AA- Neg Aa2 Stable J. Magnussen / L. Landeman UNDERWEIGHTSteen & Strom As BBB+ Stable O. Heldal / L. Landeman


32


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


Analyst(s)

Company Rating Outlook Sr. Unsec Rating Outlook Rating Outlook Rating OutlookStena Ab BB Stable B2 Stable N. Ripa / B. Børsting UNDERWEIGHTStockmann Oyj Abp B+ Stable M. Rosendal / L. LandemanStolt-Nielsen Ltd BB+ Stable BB B.K. Røed / J. MeyerStora Enso Oyj BB Stable Ba2 Stable WD M. Rosendal / L. Landeman MARKETWEIGHTStorebrand Bank Asa BBB+ Stable BBB+ Neg Nr Stable L. Holm / K. JensenStorebrand Livsforsikring As BBB+ Stable Baa1 Stable L. Holm / K. JensenSunnfjord Energi As BBB- Stable BBB- J. Magnussen / L. LandemanSuomen Hypoteekkiyhdistys BBB Neg L. Holm / K. JensenSvensk Fastighetsfinansiering Ab BBB Stable Louis LandemanSvenska Cellulosa Ab Sca A- Stable Baa1 Stable M. Rosendal / B. Børsting OVERWEIGHTSvenska Handelsbanken Ab AA- Neg Aa2 Stable AA- Stable L. Holm / K. Jensen MARKETWEIGHTSwedavia Ab A- Stable G. Bergin / L. LandemanSwedbank Ab A+ Stable Aa3 Stable A+ Pos L. Holm / K. Jensen MARKETWEIGHTSwedish Match Ab BBB Stable Baa2 Stable B. Børsting / M. Rosendal MARKETWEIGHTSydbank A/S Baa1 Stable L. Holm / K. Jensen MARKETWEIGHTSaab Ab BBB+ Stable Wr E. Hjalmarsson / L. LandemanTallink Grupp As BB Stable BB- N. Ripa / J. MagnussenTdc A/S BBB- Stable Baa3 Stable BBB Neg O. Heldal / L. Landeman MARKETWEIGHTTechnopolis Oyj BB+ Stable BB L. Landeman / E. HjalmarssonTeekay Lng Partners Lp BB Stable BB- Ø. MossigeTeekay Offshore Partners Lp BB- Stable B+ Ø. MossigeTele2 Ab BBB Stable O. Heldal / L. LandemanTelefonaktiebolaget Lm Ericsson BBB+ Stable Baa1 Stable BBB+ Stable O. Heldal / L. Landeman MARKETWEIGHTTelenor Asa A Stable A3 Stable O. Heldal / L. Landeman MARKETWEIGHTTeliasonera Ab A- Stable A3 Neg A- Stable O. Heldal / L. Landeman UNDERWEIGHTTeollisuuden Voima Oyj BBB- Neg Wr BBB Stable J. Magnussen / L. Landeman OVERWEIGHTThon Holding As BBB+ Stable O. Heldal / L. LandemanTine Sa BBB+ Stable O. Heldal / L. LandemanUpm-Kymmene Oyj BB+ Stable Ba1 Stable WD M. Rosendal / L. Landeman MARKET WEIGHTVasakronan Ab A- Stable E. Hjalmarsson / L. LandemanVattenfall Ab BBB+ Neg A3 Neg A- Neg J. Magnussen / L. Landeman MARKETWEIGHTVestas Wind Systems A/S BBB- N. Ripa / J. Magnussen OVERWEIGHT


33

Fixed Income Credit Research team Thomas Hovard

Head of Credit Research

+45 45 12 85 05

[email protected]

Pegah Ahmarinejad

Real Estate

+46 8 568 80593

[email protected]

Iver Christian Båtvik

Seismic

+47 95 97 74 45

[email protected]

Gabriel Bergin

Strategy, Industrials

+46 8 568 80602

[email protected]

Brian Børsting

Industrials

+45 45 12 85 19

[email protected]

Emil Hjalmarsson

Real Estate, Construction

+46 8 568 80634

[email protected]

Lars Holm

Financials

+45 45 12 80 41

[email protected]

Jakob Magnussen

Utilities, Energy

+45 45 12 85 03

[email protected]

Øyvind Mossige

Oil services

+47 85 40 54 91

[email protected]

Niklas Ripa

High Yield, Industrials

+45 45 12 80 47

[email protected]

Knut-Ivar Bakken

Fish farming

+47 85 40 70 74

[email protected]

Ola Heldal

TMT

+47 85 40 84 33

[email protected]

Louis Landeman

TMT, Industrials

+46 8 568 80524

[email protected]

Bjørn Kristian Røed

Shipping

+47 85 40 70 72

[email protected]

Mads Rosendal

Industrials, Pulp & Paper

+46 8 568 80594

[email protected]

Sondre Dale Stormyr

Offshore rigs

+47 85 40 70 70

[email protected]

Haseeb Syed

High Yield, Norway

+47 85 40 54 19

[email protected]

Katrine Jensen

Financials

+45 45 12 80 56

[email protected]

Henrik René Andresen

Credit Portfolios

+45 45 13 33 27

[email protected]

34

Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ('Danske Bank'). The authors of this research report are Henrik René Andresen, Senior Analyst and Katrine Jensen, Analyst.

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