Moody’s assigns a Baa3 rating to Dell’s proposed secured notes

Moody’s assigned a provisional rating of Baa3 to Dell Inc.’s proposed senior secured notes.

The debt is being issued by Diamond 1 Finance Corporation (“Finco 1”) and co-issuer Diamond 2 Finance Corporation (“Finco 2”), which are entities that will merge into Dell International LLC (a debt issuing subsidiary of Dell Inc.) and EMC Corporation (“EMC”), respectively, upon closing of the Dell EMC merger.

Post closing of the transaction, Dell International and EMC will assume all of Finco 1’s and Finco 2’s obligations under these notes.

The Dell – EMC merger is expected to close by the end of October 2016.

Source: Moody’s

Moody’s rates Kraft’s debt at Baa3

Moody’s assigned a credit rating of Baa3 to a total of USD 5bn senior unsecured notes offered by Kraft Heinz Foods Company.

The bonds were issued in separate 10-year and 30-year tranches.

Proceeds from the offerings would be used primarily to call a portion of the company’s $8 billion 9% preferred stock, callable 6 June, 2016. The rating outlook is stable

Source: Moody’s Rating Report

Noble Group faces rising cost of debt amid restructuring deal

According to Noble Group’s CEO Yusuf Alireza, the company is planning to restructure its debt amid rising borrowing costs. The firm seeks to recover from a commodity market slump that saw it post its first annual loss in almost 20 years and had its credit rating downgraded to junk.

As per the company’s presentation for its upcoming AGM, average cost of debt was seen rising from an estimated 3.9% in 2016 to 4.1% in 2017, before dropping back to 3.8% in in 2018. Although borrowing costs were rising on the company’s revolving facility, its weighted-average cost of debt was expected to remain at the same level.

Further, the company seeks to raise a $1bn unsecured loan on which it faces higher borrowing costs, and was also looking to raise a $2bn loan backed by inventories.

CEO Alireza stated that the company aimed to refinance debt before May 2016.

Source: Bloomberg

ExxonMobil increases its dividend slightly

Exxon Mobil declared a quarterly dividend of 75 cents a share on Wednesday, an increase of 2 cents a share, to yield 3.4%. The dividend is payable to shareholders of record as of 13 May 2016.

The dividend increase is the company’s smallest in the last 34 years, as other energy firms have been reducing expenditure to conserve cash for operations.

Separately, S&P downgraded ExxonMobil to AA+ from its earlier rating of AAA.

Source: WSJ


Hercules Offshore could be pushed back into bankruptcy

Shallow-water driller Hercules Offshore could be forced to file for bankruptcy for the second time in less than a year as some creditors state that it may have breached its covenant on the $450m first lien sr. sec. credit facility. Previously, Hercules had filed for Ch-11 restructuring in August 2015 and emerged from bankruptcy in November 2015.

During the restructuring process, the company issued a debt-to-equity swap conversion for bondholders holding c.$1.2bn of debt for a 96.9% stake in the new equity shares and raised a $450m credit facility.

S&P downgraded the company’s $450m credit facility to CCC-. Further, the company had filed a forebearance agreement last week which has caused concern amongst creditors.

Creditors claimed that Hercules first violated the terms of the loan when its subsidiary, Hercules Offshore Nigeria Limited, failed to offer a vessel’s mortgage as collateral for the loan on 15 April 2016. The second violation occurred when Hercules didn’t meet a deadline to consolidate its Gibraltar-based affiliate into another unit of the company.

In the forebearance agreement filed with the SEC, Hercules stated that creditors had asserted that the company was in default, although they had not provided a formal notice on the same. Hercules also stated that it believed that default could be avoided before next week’s deadline.

Source: Fuelfix


S&P downgrades CMA CGM

Credit ratings agency Standard & Poor’s (S&P) downgraded container shipping operator CMA CGM to ‘B’ from ‘B+’.

Further, S&P lowered the rating on the company’s senior unsecured debt to ‘CCC+’ from ‘B-’.

S&P expects CMA CGM to witness a period of constrained earnings due to the challenging conditions in the container shipping industry and low freight rates in 2016 and 2017.

S&P added that it would further lower the rating in the next few quarters if it believed the carrier was experiencing a larger fall in freight rates than expected.

The company had previously stated that container liners were experiencing severe freight-rate volatility and downward pressure on primary and secondary routes, which it expected to continue in the next 12-18 months.

Source: Container Mag

S&P lowers outlook on China; says domestic-led economic growth moving “slower than expected”

Ratings agency S&P lowered its outlook on China’s credit rating of ‘AA-‘ to negative from stable, citing the Mainland’s attempts to overhaul its economy from an investment-led and export-oriented one toward domestic-led growth was proceeding at a slower pace than expected.

The move follows that by Moody’s, which lowered its outlook on China to negative earlier in March 2016 for its credit rating of Aa3. Fitch Ratings rated China as ‘A+’ with a stable outlook.

As part of its rationale on the lower outlook on China, S&P outlined the following reasons:

  • gradual increase in economic & financial risk to the government’s creditworthiness
  • weakening of sovereign and corporate credit metrics
  • increased reliance on credit to push the sluggish economy

Source: WSJ

Fitch Ratings downgrades Tata Steel and its UK arm

Ratings agency Fitch downgraded India-based steel manufacturing company Tata Steel Ltd. and its wholly-owned subsidiary Tata Steel UK Holdings on declining profitability and a spike in leverage during FY 2016. It has placed the credit ratings of both entities on Rating Watch Evolving (RWE).

The downgrade reflects uncertainty regarding Tata Steel’s announcement of restructuring its portfolio which includes a potential partial / complete divestment of its UK operations. A partial or a complete exit from the UK operations would be a credit positive for the company, Fitch stated.

Weak demand and overcapacity, along with softening of commodity prices globally, has affected the company. Demand growth in India for nine months ending December 2015 was at 4.7%, met largely by rising imports. However, recent moves by the Indian government to implement a minimum import price followed by a 20% duty on imports has provided some relief to domestic steel producers, but prices have still remained 20% lower than the average for FY-15.

Softening steel prices were evident in Tata Steel’s earnings for the 9M-15 period which saw consolidated EBITDA per tonne decline 35% to about INR 7,400 per tonne from Rs 11,400 per tonne in FY15, hit by a Rs 7,150 per tonne fall in realisation.

Source: Business Standard

Moody’s downgrades Samarco Mineracao; outlook negative

Moody’s downgraded Brazil-based mining firm Samarco Mineracao’s CFR to Caa2 from Caa1, with a negative outlook on the company. Ratings on the following debt instruments were also downgraded (outlook: negative):

  • $1bn Senior Unsecured Notes due 2022: from Caa1 to Caa2
  • $700m Senior Unsecured Notes due 2022: from Caa1 to Caa2
  • $500m Senior Unsecured Notes due 2022: from Caa1 to Caa2

Moody’s attributed the downgrade to the continued uncertainty about Samarco’s ability to resume mining operations in Brazil, concerns over liquidity pressures and risk arising from compensation payments the company has to make in light of its dam burst accident.

Samarco’s mining operations have been suspended since November 2015 when a dam rupture at one of its mines caused a massive flood in the Minas Gerais district of Brazil.

In the absence of mining operations, revenue generation has been significantly affected and the company may not have sufficient funds to meet its financial obligations and operating expenses in 2016.

Further, with compensation claims arising from the incident, Samarco could face significant cash outflows in 2016, further pressuring the company’s liquidity.

During March 2016, the miner and its shareholders (BHP Billiton and Vale S.A.) signed a compensation agreement with Brazilian federal authorities which outlined the financial terms Samarco would have to comply with until 2030 in relation to the accident.

As per the agreement, Samarco would have to make payments amounting to a total of BRL 4.4bn from 2016 to 2018, and further annual payments between BRL 0.8 – 1.6bn from 2019 to 2021. Payments to be made from 2022 until 2030 would be defined by the authorities based on the targets set by the agreement.

Source: Moodys’ Rating Report (16 March 2016)



Moody’s downgrades BHP Billiton

Mining giant BHP Billiton’s credit rating was downgraded by rating agency Moody’s to A3 from A1 amid a prolonged commodity price slump. The move follows a rating downgrade conducted earlier by S&P.

The downgrade adds to its disappointing first-half results where the company recorded losses of $5.6bn, mainly on write-downs of its U.S energy assets. The dismal earnings also led to the suspension of its dividend policy.

Price of iron ore, the commodity which accounts for a large chunk of BHP’s earnings, was down more than 70% since its peak in 2011 of nearly $192 a metric ton.

The firm has struggled with the outcome of a pending claims settlement case related to its investment in Samarco Mineracao, a Brazilian mining firm, formed by 50:50 JV with Vale S.A. Samarco faced a lawsuit in Brazil related to its dam bursting incident in which state authorities seek a compensation of upto BRL 20bn ($5bn). However, a statement released by JV partner Vale states that an agreement with the Brazilian authorities could allow the companies to pay BRL 9.6bn in compensation by 2030.

Source: WSJ