MOODYS.COM 18 MAY 2015 NEWS & ANALYSIS Corporates 2 » Coke Bottler Pours into New Territories, a Credit Positive » Williams Streamlines Its Capital Structure with Buyout of Master Limited Partnership Subsidiary » Danaher’s Planned Acquisition of Pall Is Credit Negative » Noble's Deal to Buy Rosetta Provides a Credit-Positive Foothold in Key Shale Regions » Press Ganey’s Plan to Pay Down Debt with IPO Proceeds Is Credit Positive » Novacap’s Acquisition of Uetikon Is Credit Positive » SoftBank’s Aggressive Investment Strategy Is Credit Negative » Chinese Developers’ Proposed Share Placements Are Credit Positive » Protelindo Acquisition of iForte Is Credit Positive Infrastructure 11 » Australia Mulls Credit-Negative Ownership Changes for Rail Network Operator Banks 12 » New Zealand’s Restrictions on Mortgage Lending in Auckland Will Benefit Banks Sovereigns 14 » Panama’s Reduced Capital Spending Promotes Fiscal Consolidation, a Credit Positive » Chilean President Reshuffles Cabinet, but Leaves Key Credit-Positive Policies in Place » Burundi’s Political Crisis Is Credit Negative US Public Finance 20 » San Bernardino, California's Pension Obligation Bondholders Receive a Blow in the City’s Bankruptcy RATINGS & RESEARCH Rating Changes 22 Last week we downgraded PPL Energy Supply, Banco Bradesco, Itau Unibanco, Banco Itau BBA, HSBC Bank Brasil - Banco Multiplo, Banco Votorantim, Itaú Seguros, Itaú Vida e Previdência, 62 US regional banks, Chicago, Chicago Board of Education, and the interest-only classes of a Bear Stearns commercial mortgage trust and a Goldman Sachs commercial mortgage trust. We upgraded Hologic, PPL Corporation, Banco BBM, Aetna, CNO Financial Group, various US regional banks, Qatar International Islamic Bank, 11 Norwegian banks and 52 US subprime RMBS, among other rating actions. Research Highlights 32 Last week we published on US corporate spinoffs, Asian corporate liquidity, Chinese property developers, Indian corporates, North American trucking, global capital flows, global shipping, North American covenant quality, Chilean corporates, Argentinean corporates, Peruvian corporates, Mexican corporates, Brazilian corporates, African telecoms, EMEA high-yield corporates, China General Nuclear Power, NiSource, US utilities, Chinese banks, Turkish banks, Australian banks, India, African sovereigns, Indonesia, Commonwealth of Independent States, Bermuda, Canadian metropolitan municipalities, US state housing finance authorities, US public universities, US RMBS, US auto lease ABS and European CLOs, among other reports. RECENTLY IN CREDIT OUTLOOK » Articles in Last Thursday’s Credit Outlook 40 » Go to Last Thursday’s Credit Outlook NEWS & ANALYSIS Credit implications of current events 2 MOODY’S CREDIT OUTLOOK 18 MAY 2015 Corporates Coke Bottler Pours into New Territories, a Credit Positive Last Wednesday, Coca-Cola Bottling Company Consolidated (CCBCC, Baa2 stable) said that it had signed a letter of intent with The Coca-Cola Company (Aa3 stable) to expand its distribution rights into additional territories in 10 different states and the District of Columbia. The deal is credit positive for CCBCC because it will significantly improve its scale and make it more important to the Coke system. The letter of intent follows CCBCC’s completion earlier this year of its acquisition from Coca-Cola of distribution rights in territories in Tennessee, Kentucky and Indiana. The addition of these territories, together with those just announced as part of Coca-Cola’s plan to refranchise a majority of its North American company-owned bottling territories by the end of 2017, could nearly double the bottler’s sales. CCBCC’s margins (EBIT margin is currently around 5%) could also modestly improve owing to scale efficiencies gained by adding territories close to existing markets and because Coca-Cola is retaining the manufacturing assets of the refranchised territories, with distribution and customer relationships handled by the bottlers. The proposed transaction’s purchase price will cover tangible assets, including distribution assets and real estate, and lesser amounts for the purchase of distribution rights for non-Coca-Cola-owned products sold in the territories. Similar to CCBCC’s recently completed transaction with Coca-Cola, franchise rights are not being sold. Instead, CCBCC will pay a sub-bottling fee in perpetuity for the bottling rights. This structure will reduce the amount of leverage required to complete the proposed transaction. Nevertheless, we expect increased leverage at CCBCC. After several years of deleveraging, CCBCC ended 2014 with debt/EBITDA of 4.1x, up from 3.5x in 2013, but still lower than its peak of 4.6x in 2011. The leverage increase was almost entirely because of a higher pension deficit owing to changes in mortality tables and a lower discount rate. But even modest acquisition costs on the back of this increase will likely move leverage higher over the next year, alt