MOODYS.COM 14 NOVEMBER 2016 NEWS & ANALYSIS Corporates 2 » Vantiv's Planned Acquisition of Moneris Solutions Is Credit Positive » Macy's Will Raise about $300 Million through Two Planned Asset Sales, a Credit Positive » Siemens' Strong Results and Decision to Publicly List Healthcare Business Is Credit Positive » PostNL's Integration with bpost Would Be Credit Positive Infrastructure 6 » Beijing Enterprises' Investment in Russia's Verkhnechonskneftegaz Is Credit Negative Banks 7 » Willingness of Some US Banks to Extend Larger Commercial Loans Is Credit Negative » Leading Brazilian Banks Gain Regulatory Approval to Launch Credit Bureau, a Credit Positive » Bank of England's Strict Loss-Absorbency Requirements for Large Banks and Building Societies Are Credit Positive » UK Concludes Investigation into RBS' Treatment of SME Customers, a Credit Positive » Bank of Spain Increases Capital Requirements for Systemically Important Institutions, a Credit Positive » Sweden's Proposed Financial Services Payroll Tax Is Credit Negative for Banks and Insurers » Egyptian Banks' Increased Availability of Dollars Is Credit Positive Insurers 20 » Repeal of Affordable Care Act Would Be Credit Negative for US Health Insurers Specializing in Medicaid Sovereigns 22 » Kyrgyz Republic Will Benefit from Higher Gold Output and Prices Covered Bonds 24 » French Covered Bond Law Amendment to Include a New Asset Transfer Structure Is Credit Positive Securitization 26 » California's Tax Increase on Cigarettes Is Credit Negative for Tobacco Bonds RECENTLY IN CREDIT OUTLOOK » Articles in Last Thursday’s Credit Outlook 27 » Go to Last Thursday’s Credit Outlook NEWS & ANALYSIS Credit implications of current events 2 MOODY’S CREDIT OUTLOOK 14 NOVEMBER 2016 Corporates Vantiv’s Planned Acquisition of Moneris Solutions Is Credit Positive Last Thursday, Vantiv, LLC (Ba2 stable) said that it had agreed to pay $425 million in cash to acquire the US subsidiary of Moneris Solutions Corporation (unrated), a joint investment between Bank of Montreal (BMO) and Royal Bank of Canada (RBC). The planned transaction, which Vantiv expects to close by the end of 2016, is credit positive because it will deepen the company’s bank sales channel while being leverage-neutral within a year. Assuming that Vantiv finances the majority of the purchase price with debt, we estimate that pro forma debt/EBITDA as of 30 September (including the annual EBITDA contribution from Moneris USA and our standard adjustments) would increase to about 3.8x from 3.5x. However, organic profit growth in the mid-single digits (or higher) and modest cost synergies should drive leverage back to the mid-3x range by the end of 2017. The planned purchase of Moneris USA is consistent with our view that Vantiv will continue to pursue acquisitions to build scale, expand sales channels and enhance integrated payment technologies to complement its core payment processing business. Vantiv is the second-largest US merchant acquirer behind First Data Corporation (B1 stable), according to the Nilson Report. Moneris USA, a top 20 merchant acquirer, will provide a valuable bank referral network from BMO and RBC, which will reduce customer acquisition costs compared with leads generated from other sales channels, while also lowering other selling costs such as commissions paid to independent sales organizations. Consolidation has accelerated in the merchant acquiring/processing industry. Vantiv’s purchase of Moneris USA follows two larger acquisitions completed in April: Total System Services, Inc.’s (Baa3 stable) acquisition of TransFirst for $2.35 billion in cash and Global Payments Inc.’s (Ba2 stable) acquisition of Heartland Payment Systems for $3.9 billion in a cash-and-stock transaction. Consolidation will continue because additional volumes will provide industry leaders with greater scaling advantages as their merchant-processing platforms process more retailers. Vantiv possesses very good liquidity, which will allow the company to fund the Moneris USA acquisition. We expect Vantiv to produce annual free cash flow of more than $500 million, which provides additional buffer to its current cash balance of $184 million (as of 30 September). In addition, Vantiv maintains an undrawn revolver of $650 million maturing in October 2021. Stephen Sohn Vice President - Senior Credit Officer +1.212.553.2965 stephen.sohn@moodys.com This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. NEWS & ANALYSIS Credit implications of current events 3 MOODY’S CREDIT OUTLOOK 14 NOVEMBER 2016 Macy’s Will Raise about $300 Million through Two Planned Asset Sales, a Credit Positive On 10 November, Macy’s Inc. (Baa2 negative) said it has agreed to sell two properties for about $300 milli