Moody's upgrades Places for People

Moody's Investors Service said it upgraded Places for People Homes Ltd.'s issuer rating to A3 from Baa1, upgraded the long-term debt ratings of Places for People Capital Markets plc and Places for People Treasury plc to A3 from Baa1 and maintained the stable outlooks. The agency affirmed the A2 rating on the backed senior secured debt.

The upgrade to Places for People's ratings reflect the organization's shift in strategy which will result in a reduction in riskier and less profitable non-core activities, management's focus on improving the group's profitability which will boost interest cover ratios, and its very strong liquidity position.

Places for People will keep its opportunistic strategy and diverse revenues compared with rated peers. However, the group reduced its non-core activities in the current business plan compared with the previous business plan. Places for People's social housing lettings accounted for only 42% of turnover in fiscal 2019 compared to a rated peer median of 78% (fiscal 2019). Over the next three years, this percentage will increase gradually to 44% compared to last year's business plan which forecasted a decrease to a low of 33%. Included in the reduced non-core activities is a lower exposure to market sales, with an expected peak exposure of 28% of turnover in the current business plan compared to last year's forecasted peak of 38%, Moody’s said.

S&P puts BorgWarner on watch

S&P said it placed its ratings on BorgWarner Inc. including the BBB+ issue-level ratings on the company’s unsecured debt on CreditWatch with negative implications. The placement follows the company’s announcement it plans to acquire Delphi Technologies plc in an all-stock transaction for about $3.3 billion.

“The CreditWatch placement reflects our view that the size and timing of BorgWarner's planned $3.3 billion acquisition of Delphi Technologies may indicate a shift toward a more aggressive financial policy than we expected, reducing the cushion in its credit metrics for underperformance,” said S&P in a press release.

S&P said it will meet with management to discuss the transaction in detail with a focus on profitability and cash flow generation of the combined entity, future acquisition strategy, synergy timelines and financial policy.

Moody’s revises BorgWarner view to negative

Moody's Investors Service said it affirmed the ratings of BorgWarner, Inc., including its Baa1 senior unsecured rating, following the announcement the company entered a definitive agreement to acquire Delphi Technologies plc, and revised the outlook to negative.

The agency placed Delphi's B2 senior unsecured notes under review for upgrade. Delphi's other ratings are unaffected.

The negative outlook reflects Moody's belief BorgWarner's performance following the acquisition will be challenged over the near-term by continued weakening global automotive production, Delphi's unfavorable product mix of diesel engine-rated products, Delphi's exposure to softening commercial vehicle production (about 25% of Delphi's revenues) and the rate of consumer adoption of electrified vehicle over the coming years.

S&P revises FedEx view to negative

S&P said it revised the outlook for FedEx Corp. to negative from stable.

“The negative outlook reflects that FedEx's credit metrics have deteriorated as the company continues to face a weak manufacturing economy, including reductions in international air freight and tepid B2B domestic parcel and freight shipping. We expect FedEx's FFO-to-debt ratio to be in the low- to mid-20% area in fiscal 2020,” said S&P in a press release.

S&P affirmed FedEx’s BBB rating.

Moody’s revises Southwest Gas view to negative

Moody's Investors Service said it changed the outlooks for Southwest Gas Corp., and its parent Southwest Gas Holdings, Inc. to negative from stable.

“The negative outlooks at both Southwest Gas and Southwest Holdings are driven by our expectation that steadily rising debt at Southwest Gas to fund high capital expenditures could result in a sustained period of weak credit metrics,” said Nana Hamilton, a Moody’s assistant vice president and analyst, in a press release.

The agency expects Southwest Gas will use a combination of internally generated cash flows, debt at the utility level and equity proceeds from the parent to fund this capital investment program. “However, the company's financing plan is more heavily weighted towards debt and we see debt at the utility increasing steadily while cash flow grows more slowly, as it recovers from a largely tax-reform associated decline. This will result in low debt coverage metrics, including a ratio of operating cash flow pre-working capital (CFO pre-WC) to debt in the mid-teens,” Moody’s said.

Moody’s also affirmed the ratings of both companies.

S&P revises Rolls-Royce view to stable

S&P said it revised its outlook for Rolls-Royce plc to stable from negative and affirmed its BBB- ratings on the company.

“With the risk of a no-deal Brexit diminishing and remediation of the Trent 1000 considered fully provisioned for, Rolls-Royce should be well poised to deliver improved results in 2020 and 2021. Our outlook revision reflects our view that after experiencing two very tough years (2018 and 2019), Rolls-Royce’s profitability, core cash flows, and credit metrics should significantly improve through 2020 and 2021,” the agency said in a press release.

In 2020 and 2021, S&P expects Rolls-Royce’s revenues to grow to comfortably more than Ł16 billion (including the benefit of foreign-exchange tailwinds), and its S&P Global Ratings-adjusted EBITDA margins to rise to about 11%-13%, with debt to EBITDA of 1.4x-1.6x and funds from operations (FFO) to debt of more than 45% at the same time.

Moody’s rates Arconic Rolled bonds Ba3

Moody’s Investors Service said it assigned a Ba3 rating to Arconic Rolled Products Corp.’s senior secured second-lien bonds. At the same time, Moody’s assigned an SGL-1 speculative grade liquidity rating.

The agency affirmed the Ba2 corporate family rating, Ba2-PD probability of default rating and the Ba1 rating on the company’s $1 billion senior secured first-lien revolving credit facility and $800 million senior secured first-lien term loan B. The outlook is negative.

“The Ba2 CFR reflects Arconic’s end market diversity and global footprint but incorporates softer market conditions in several of its end markets as well as the expected impact of Boeing’s production suspension of its 737 Max, which will affect all suppliers to this Boeing platform. ARP’s environmental and other unknown magnitude of liabilities from the Grenfell fire are also considerations in the CFR rating,” said Carol Cowan, a Moody’s senior vice president and lead analyst for Arconic, in a press release.

S&P rates Elanco loans, notes BB+

S&P said it assigned BB+ issue-level rating to Elanco Animal Health Inc.’s proposed revolving credit facility, term loan A, term loan B and senior secured notes. The recovery rating is 3, reflecting the expectation for meaningful recovery (50%-70%; rounded estimate: 65%) in the event of a payment default. Proceeds will be used for the acquisition of Bayer AG’s animal health unit.

“We are also lowering our issue-level rating on Elanco’s unsecured notes to BB from BB+. The recovery rating is 5, reflecting our expectation for modest recovery (10%-30%; rounded estimate: 15%) in the event of a payment default,” S&P said in a press release.

Based on the proposed capital structure, S&P expects to lower the issuer credit rating to BB from BB+ and assign a stable outlook. “We also expect to lower the issue-level ratings on the secured debt to BB from BB+ and the issue-level ratings on the unsecured debt to BB- from BB,” the agency said.

S&P affirmed Elanco’s BB+ rating.

S&P rates Helvetia notes BBB+

S&P said it assigned its BBB+ long-term issue rating to the junior subordinated perpetual and junior subordinated dated tier 2 notes to be issued by Helvetia Schweizerische Versicherungsgesellschaft AG. The group's parent, Helvetia Holding AG (not rated), will guarantee the notes.

“We expect to classify the notes as having intermediate equity content. We consider both issues to be tier 2 capital in our capital model,” said S&P in a press release.

The issue rating on the proposed notes is two notches below the long-term issuer credit rating on Helvetia. This reflects S&P’s standard approach for rating subordinated debt issues. The solvency ratios measured by the Swiss Solvency Test of the consolidated group stood at 222% as of Jan. 1, 2019.

“We therefore consider the risk of mandatory deferral to be remote and we do not think it is necessary to deduct a further notch for additional nonpayment risk to derive the rating on the notes. The issue rating reflects the subordination and interest deferral features of the notes,” S&P said.

Fitch rates Intermediate Capital bond BBB

Fitch Ratings said it assigned Intermediate Capital Group plc’s senior unsecured fixed-rate euro benchmark bond issue with maturity 2027 an expected rating of BBB.

The proceeds are expected to be used to refinance Ł250 million of debt maturing in 2020 with the remainder used primarily to fund seed investments. Fitch expects the bond proceeds to be held in low risk and highly liquid money market funds in the interim. “We do not expect leverage to exceed ICG’s stated leverage target of between 0.8x to 1.2x gross debt to tangible equity (FYE19: 0.86x, excluding the borrowing in ICG’s CLO funds) as a result of this transaction,” Fitch said in a press release.

The senior unsecured bond is rated in line with ICG’s long-term issuer default rating and senior unsecured debt ratings as Fitch views the probability of default on senior unsecured debt as the same as the probability of default of the entity. The bond’s rating is therefore driven by the same considerations that drive ICG’s long-term IDR, the agency said.

Fitch rates QVC notes BBB-

Fitch Ratings said it assigned a BBB-/RR1 rating to QVC, Inc.'s proposed offering of senior secured notes. QVC is expected to use the proceeds primarily to repay borrowings under its senior secured credit facility along with general corporate purposes.

Fitch said it expects sufficient proceeds will be directed toward debt repayment to make this largely a leverage neutral transaction as management has not articulated any change to their net leverage target of 2.5x. Fitch notes that, simultaneous with the closing of these new notes, QVC intends to reduce its revolver availability to $3.05 billion from $3.65 billion.

Fitch gives Arconic Rolled notes BB+

Fitch Ratings said it assigned an expected BB+/RR4 rating to Arconic Rolled Products Corp.'s new senior second-lien notes. The notes were issued as part of the spin-off transaction from Arconic Inc. Arconic Rolled’s issuer default rating is also an expected BB+, and the company's $800 million senior first-lien secured term loan and $1 billion senior first-lien secured revolver are rated an expected BBB-/RR1. The outlook is stable.

The company’s ratings are supported by the company's strong financial structure, which is generally in line with companies rated at investment grade levels. The company's end-markets are also relatively diversified, and comprised of industries that are shifting towards lighter weight materials, which Arconic Rolled specializes in, Fitch said.

S&P gives Union Pacific notes A-

S&P said it assigned its A- issue-level rating to Union Pacific Corp.'s proposed senior unsecured notes due 2027, 2030, 2050 and 2070. The company will use the proceeds for general corporate purposes, including share repurchases.

“We rate Union Pacific's unsecured debt A-, the same as our issuer credit rating, because no significant elements of subordination risk are present in its capital structure,” said S&P in a press release.

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