S&P downgrades Boeing

S&P said it lowered its long-term issuer credit rating on Boeing Co. to A- from A on news the company plans to suspend production of the 737 MAX in January 2020, and there is still significant uncertainty as to when it will resume deliveries.

Boeing’s suspension of production of the 737 MAX may save some cash in the near term, but it could introduce additional risk into the supply chain. The company said it doesn’t plan to furlough any workers on the program and will likely have to support some suppliers, so the cash saved from stopping production could be modest.

“We believe Boeing is likely to support weaker suppliers. But the longer production is halted, the more likely that some, especially smaller suppliers, could run into liquidity problems or take other actions (such as furloughing employees that will be difficult to rehire in a tight labor market). That will make it difficult for them to support MAX production once it resumes. Furthermore, the supply chain for the MAX is global and very complex. Stopping and restarting could be costly and difficult,” S&P said in a press release.

The outlook is developing.

S&P cuts Nissan

S&P said it lowered its ratings for Nissan Motor Co. Ltd. to BBB+ from A- and removed it from CreditWatch with negative implications.

“We downgraded the Japan-based automaker because it is unlikely to materially improve its profitability, which significantly lags that of global automakers in the A rating category, in the coming year or two. We expect that it will take time for the company to benefit from its efforts to boost the competitiveness of its products through model rollouts and to enhance operating efficiencies through cuts in production capacity. This is because continued sluggish auto sales in major markets are likely to create challenging conditions for the company in the next one to two years,” S&P said in a press release.

The company’s EBITDA margin (excluding its sales finance business) is likely to remain at 5%-6% in the one to two years after falling below 5% in fiscal 2019 (ending March 31, 2020). In comparison, Daimler AG’s EBITDA margin is likely to stay at about 8%-10% in the coming one to two years, despite the business conditions, as it benefits from the release of competitive new models and efforts to cut costs. BMW AG is likely to maintain an EBITDA margin above 10%.

The outlook is negative.

DBRS ups Allied Irish Banks

DBRS said it upgraded the long-term issuer rating of Allied Irish Banks plc to A (low) from BBB (high). The trend has been changed to stable from positive.

“The upgrade of the long-term issuer rating reflects AIB’s progress in further reducing its non-performing loans, as well as in sustaining core revenues in the very low interest rate environment. The ratings continue to incorporate AIB’s strong domestic franchise, its sound funding and liquidity position and its strong capital position, which has also strengthened with the sale of NPLs,” said DBRS in a press release.

Moody’s ups Ally debt rating

Moody’s Investors Service said it upgraded the senior long-term unsecured rating of Ally Financial Inc. to Ba1 from Ba2. All other long-term ratings of Ally Financial and GMAC Capital Trust I were upgraded one notch. The outlook is stable.

Moody’s said the upgrade of Ally Financial's ratings is based on continuous improvement in the funding profile from sustained growth in deposits and stabilized performance in the auto portfolio.

Ally continues to increase its deposit base at a rapid rate, with deposits growing to $119 billion as of Sept. 30, a year-over-year increase of 18%. As of Sept. 30, deposits comprised 74% of Ally's funding profile, a significant improvement versus the 66% as of year-end 2018 and 62% as of year-end 2017. Along with this improvement, Ally's ratio of market funds as a percentage of tangible banking assets has declined considerably to 23% as of Sept. 30, from 31% as of year-end 2018, Moody’s said.

Ally Financial’s used auto loan portfolio grew to 53% of retail auto originations for 2019. The growth in the used vehicle mix contributed to a trend of higher credit losses from 2015 through 2017. However, over the last two years, auto portfolio net charge-offs have steadied through a combination of underwriting quality, the U.S. economy and stabilized used car values. Ally's automotive finance operations displayed solid pre-tax income growth as a result of this, the agency said.

S&P upgrades Duquesne Light

S&P said it upgraded Duquesne Light Co. to BBB+ from BBB and the rating on its first-mortgage bonds to A from A-. The agency removed the ratings on the company from under criteria observation, where they were placed on July 1.

After this review, S&P concluded the cumulative value of the regulatory and structural protections between Duquesne Light and its parent Duquesne Light Holdings Inc., are adequate to insulate the issuer credit rating on the company from the group credit profile on its parent by as much as one notch.

The outlook is stable.

S&P raises Texas-New Mexico Power

S&P said it raised the rating on Texas-New Mexico Power Co. to A- from BBB+ and removed all its ratings from criteria observation. The company is a subsidiary of PNM Resources Inc.

“The upgrade of TNMP reflects our assessment of TNMP’s stand-alone credit profile being above parent PNMR’s group credit profile of bbb+, our view of the utility as sufficiently separate from its parent, and sufficient regulatory and structural insulating measures in place,” said S&P in a press release.

The negative outlook on TNMP mirrors the negative outlook on parent PNMR.

S&P: Swiss Re Finance Jersey on positive watch

S&P said it moved the senior debt rating for Swiss Re Finance Jersey Ltd., formerly Swiss Re Reassure Ltd., to CreditWatch with positive implications from developing. The agency removed the company’s rating from CreditWatch with negative implications and affirmed its A- rating.

“This reflects our expectation that Swiss Re Ltd. will provide SRFJL with group support in the form of a guarantee covering its senior debt by the closing date for the sale of ReAssure,” said S&P in a press release.

The €750 million 1.375% senior debt instrument due in 2023 issued by SRFJL is rated A-, in line with S&P’s issuer credit rating.

The outlook is stable.

Moody’s changes HSBC Australia view to negative

Moody’s Investors Service said it changed to negative from stable the outlook on the ratings for HSBC Bank Australia Ltd. following Moody’s decision to change to negative from stable, the outlook of its parent, the Hongkong and Shanghai Banking Corp. Ltd, as announced on Tuesday.

Moody’s also affirmed the bank’s A1 long-term issuer rating, as well as its other ratings, at their current levels.

Moody’s incorporates three notches of affiliate support uplift into the A1 long-term ratings of HSBC Bank Australia given Moody’s assessment of a very high likelihood of support from its parent in times of need.

Moody’s changes New York Life view to negative

Moody’s Investors Service said it changed the outlook for New York Life Insurance Co. to negative from stable. The outlook change follows the announcement by New York Life and Cigna of New York Life’s agreement to buy Cigna’s group life and disability insurance business for $6.3 billion. The companies expect the transaction to close in the third quarter of 2020, subject to regulatory approvals.

Commenting on the negative outlook, Moody’s noted the acquisition will provide some benefits to New York Life, further diversifying its business and earnings profile, and immediately hoisting it to a top-five position in the markets for group life and disability income products – markets in which it currently is not a major player. New York Life will have the opportunity to cross-sell insurance, including participating whole life insurance, to Cigna’s 9,600 base of corporate clients, but this will take time, the agency said.

However, the transaction will move New York Life’s business and financial profiles incrementally further away from its core participating whole life insurance focus, a trajectory the company has been on for several years.

While the transaction’s financing arrangements have not been disclosed, given the company’s lack of access to the equity market as a mutual insurer, debt sales and/or the use of internal capital could increase its financial leverage ratios and decrease its coverage ratios.

S&P changes Staples view to negative

S&P said it revised its outlook to negative and affirmed the B+ issuer credit rating on Staples.

“The negative outlook reflects credit metrics that have deteriorated from our prior expectations and encompasses the risk that revenues may not improve over the next 12 months, preventing adjusted leverage from getting to the mid 5x area,” S&P said in a press release.

A slowdown in organic growth in the company’s more cyclical channels, combined with ongoing headwinds in the Staples.com and core office supply businesses have anchored Staples’ revenues. These factors outweighed contributions from acquisitions, leading to a lower-than-expected base of earnings.

Revenues rose just under 1% for the year-over-year period ended Nov. 2, in contrast to expectations for mid-single digit percent growth for the same period, the agency said.

S&P revises Exor view to positive

S&P said it revised its outlook on Exor to positive from stable and affirmed its BBB+ rating.

“We expect the quality of Exor’s portfolio to improve following the completion of the proposed merger of Fiat Chrysler Automobiles (FCA; BB+/Watch Pos/B) and Peugeot S.A. (PSA; BBB-/Stable), which foresees an extraordinary dividend of about €1.6 billion for Exor and the planned separation of CNH Industrial (CNHI) into two listed companies,” the agency said in a press release.

Exor’s portfolio is worth about €25 billion, of which 28% is represented by PartnerRe, 25% by Ferrari, 23% by FCA, and 16% by CNHI. Today the top four assets represent about 92% of Exor’s portfolio. Exor’s portfolio composition has been almost unaltered since 2016, when it acquired PartnerRe, S&P said.

Moody’s changes TECO view to positive

Moody’s Investors Service said it affirmed the Baa2 senior unsecured ratings of TECO Energy, Inc. and TECO Energy’s guaranteed financing subsidiary, TECO Finance, Inc.; and the A3 Issuer and senior unsecured ratings of Tampa Electric Co. Moody’s changed the outlooks of TECO Energy, TECO Finance and Tampa Electric to positive.

“The positive outlooks for TECO Energy and Tampa Electric reflect the debt reduction that has occurred across the Emera corporate family that we expect will continue at both the intermediate holding company and parent company level, as well as the two companies’ ability to maintain strong credit metrics” said Jeff Cassella, a Moody’s vice president and senior credit officer, in a press release.

TECO Energy’s rating is primarily driven by the strong credit quality of its principal subsidiary, Tampa Electric. The credit profile also mirrors TECO Energy’s strong financial metrics, including a ratio of cash flow from operations before changes in working capital (CFO pre-W/C) to debt that we expect to be maintained in the low-20% range. The credit profile also incorporates the modest cash flow and regulatory diversity provided by its ownership of New Mexico Gas Co.

Tampa Electric’s rating reflects Florida’s highly credit supportive regulatory framework, which allows for the broad use of timely cost and investment recovery mechanisms.

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