MOODYS.COM 13 NOVEMBER 2017 NEWS & ANALYSIS Corporates 2 » Allegheny Technologies' equity issuance and joint venture are credit positive » Broadcom's acquisition of Qualcomm would form a semiconductor behemoth, but would be credit negative » Leonardo’s lower profit guidance and helicopter division weakness are credit negative » China Overseas Grand Ocean's proposed rights issue is credit positive » Evergrande's third capital raise will strengthen its liquidity Infrastructure 9 » Kansas City, Missouri voters approve new airport terminal, a credit positive for airport operator » Combining SSE's and innogy's British retail supply businesses will reduce business risk Banks 12 » Arrests of Banco de Costa Rica's senior management are credit negative » France's additional tax on large corporates' profits is credit negative for mutualist banks » Cypriot banks' slowdown in loan restructurings is credit negative » Proposed Baltic covered bond market would diversify bank funding, a credit positive » BTMU's acquisition of Bank Danamon Indonesia stake is credit positive » Bank Danamon Indonesia would benefit from BTMU's reported plan to acquire a 40% stake » Australia’s decision to allow mutuals to issue capital instruments is credit positive Sovereigns 22 » Norway's 2018 budget negotiations begin despite delay in forming a government, a credit positive » Democratic Republic of Congo's scheduled elections offer tenuous path to end political crisis Sub-sovereigns 25 » German Laender strong tax revenue growth is credit positive US Public Finance 26 » Pennsylvania vote clears path to eliminate most property taxes, a credit negative » Voters support dissolution of Dallas County Schools, credit positive for GOLT bondholders Securitization 28 » Failed Sprint/T-Mobile merger benefits wireless tower operators and their ABS » German Auto ABS benefit from exposure to regions with decreasing over-indebtedness ratios RECENTLY IN CREDIT OUTLOOK » Articles in Last Thursday’s Credit Outlook 31 » Go to Last Thursday’s Credit Outlook Click here for Weekly Market Outlook, our sister publication containing Moody’s Analytics’ review of market activity, financial predictions, and the dates of upcoming economic releases. NEWS & ANALYSIS Credit implications of current events 2 MOODY’S CREDIT OUTLOOK 13 NOVEMBER 2017 Corporates Allegheny Technologies’ equity issuance and joint venture are credit positive Last Tuesday, Allegheny Technologies Incorporated (ATI, B2 negative) announced that it had issued $408 million of equity in part to redeem $350 million of 9.375% notes due 1 June 2019, a week after forming a joint venture with Tsingshan Group. The debt repayment and reduced interest expense are credit positive for ATI because they will improve coverage and leverage metrics. Pro forma for the debt repayment, leverage, as measured by debt/EBITDA, would improve to approximately 5.9x for the 12 months that ended 30 September 2017 from 6.7x, while EBIT/interest would rise to around 1.6x from 1.3x. This improvement, an ongoing strengthening in ATI’s High Performance Materials and Components segment as aerospace industry deliveries continue to grow, and easing raw material surcharges in the Flat Rolled Products segment will strengthen the company’s credit metrics to levels more appropriate for its current rating in a shorter time frame than we previously had expected. Meanwhile, the joint venture, which will be treated as a 50-50 equity investment, will purchase slabs from Tsingshan’s Indonesian facility and convert them into coils under a conversion agreement at ATI’s Hot Rolling and Processing Facility (HRPF). Once ATI achieves its target production levels, it will result in better utilization of the HRPF, currently at around 25%, and improve cost absorption. ATI will contribute its idled Direct Roll Anneal and Pickle facility to the joint venture, which will restart the facility to process the coils into sheet. ATI’s current corporate family rating reflects the company’s weak debt protection metrics and high leverage amid challenging industry conditions over the past several years. However, improving trends such as greater aerospace demand amid new contracts for next-generation jet engines are counterbalancing those challenges. The aerospace/defense markets accounted for 49% of ATI’s revenue through 30 September 2017. Our rating reflects ATI’s strong customer relationships, order book, favorable long-term agreements and the company’s technological capabilities and leading position as a producer of specialty alloys. Pittsburgh-based ATI is a diversified producer and distributor of components and specialty metals such as titanium and titanium alloys, nickel-based alloys and stainless and specialty steel alloys. For the 12 months that ended 30 September 2017, the company had revenue of $3.4 billion. Carol Cowan Senior Vice President +1.212.553.4999 carol.cowan@moodys.com This publication does not announce a credit ratin