Weekly Credit Update - Danske Bank...Important disclosures and certifications are contained from...

Important disclosures and certifications are contained from page 8 of this report. www.danskeresearch.com

Investment Research — General Market Conditions

Headlines

Indices remained unchanged during the week.

A.P. Moller Maersk presented bullish outlook for 2014.

Ireland, ESB and Bord Gais upgraded by Moody’s.

Primary market remains busy.

Market commentary

Volatility remains relatively modest in the European credit markets. Overall we feel this

is driven by an underlying bullish market sentiment, which is partially pared by a general

feeling that spreads are at tight levels in especially the investment grade segment. This is

also manifested in strong performance in the primary issuance markets, where investors

can satisfy their risk appetite through new issue premiums. The iTraxx main index

remained unchanged at +69bp. The overall low yield levels in the market is driving a

‘hunt for yield’ amongst investors. This continues to push high yield spreads tighter.

Subsequently the iTraxx crossover index tightened by 5bp to +268bp.

A.P. Moller Maersk delivered a strong Q1 14 result this week. Being a good indicator for

the state of the general economy, A.P. Moller Maersk’s outlook points to rosier times

ahead. The container giant reported a 7% y/y growth in freight volumes and sees the

global container market grow by 4-5% this year. The company also raised its FY

guidance as a consequence of stronger cost control in Maersk Line.

In Ireland, Moody’s acknowledged the republic’s economic recovery by upgrading the

sovereign rating by two notches to ‘Baa1’. Subsequently, Ireland’s two government

linked utilities, Bord Gais and ESB, were upgraded to ‘Baa1’. Both utilities’ ratings now

reflect their stand-alone credit quality.

The primary market continues its high pace of activity. This week we saw issuance from

all parts of the capital structures and credit quality. We saw both subordinated and senior

issuance from both financials and non-financials. Danske Bank repeated last week’s

success and issued a EUR750m 3Y floater. Deutsche Bank kept the AT1 market kicking

with a multi-tranche AT1 issue. On top of this, GDF Suez underlined that the corporate

hybrid market remains open, issuing a dual tranche EUR2bn hybrid.

Selected new issues during the week

Name Rating Coupon Maturity Currency Size Spread*

Danske Bank Baa1/A FRN 3Y EUR 750m +35 Deutsche Bank AT1 Ba3/BB 6% perpNC8 EUR 1.75bn +470 Prologis Baa2/BBB+ 3% 12Y EUR 500m +171 Carlsberg Baa2/NR 2.5% 10Y EUR 1bn +126 GDF Suez (hybrid) A3/NR 3% perpNC5 EUR 1bn +267 GDF Suez (hybrid) A3/NR 3.875% perpNC10 EUR 1bn +265

Note: Ratings are senior unsecured ratings from Moody's and S&P * Mid-swaps for fixed, discount margin for

floating. Source: Bloomberg, Danske Bank Markets

23 May 2014

Senior Analyst Jakob Magnussen, CFA +45 45 12 85 03 [email protected]

Weekly Credit Update

Contents

Market commentary 1

Selected charts 3

Recently published research 4

Official and shadow ratings 8

iTraxx Europe (investment grade)

Source: Bloomberg, Danske Bank Markets

iTraxx Crossover (high yield)

Source: Bloomberg, Danske Bank Markets

mailto:[email protected]

2 | 23 May 2014 www.danskeresearch.com

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EUR investment-grade cash spreads (ASW) EUR high-yield cash spreads (ASW)

Source: Danske Bank Markets Source: Danske Bank Markets

iTraxx (Europe) vs CDX (US) Investment grade corporate yields


Nordic corporates vs iTraxx Nordic banks 5y CDS spreads



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Corporate BBB bond yield vs EuroSTOXX dividend yield 3M Libor OIS spreads


Financials spread vs non-financials (Industrials), A-rated

Source: Danske Bank Markets


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Recently published research

Credit Update – Nykredit Bank Q1 14 -HOLD

Once again Nykredit Bank only managed to break even, as value adjustments on interest

swap contracts continued to be a drag on earnings. We expect such value adjustments to

continue to bring volatility over the coming period which, together with reduced capital

ratios, makes Nykredit Bank less attractive despite relatively favourable pricing. We

maintain our HOLD recommendation.

Credit Update – A.P. Moller Maersk Q1 14 - BUY

APMM reported a solid first quarter and upgraded its guidance for 2014 in connection

with the Q1 report. Maersk Line continues to perform strongly. We continue to see credit

metrics as strong for the current BBB+/S rating but due to high outstanding capex,

significant exposure to shipping and a likely higher payout ratio to shareholders going

forward, we do not expect a rating upgrade. However, we continue to find the bond

valuation attractive and maintain our BUY recommendation.

Credit Update – Olav Thon Eiendomsselskab ASA Q1 14

Olav Thon Eiendomsselskap (OLT) reported another strong quarter yesterday with rental

income of NOK493m (NOK480m) and cash flow from operations of NOK230m

(NOK228m). Credit metrics are stable with LTV at 47%, equity share close to 40% and

EBITDA interest coverage above 2.5x. With modest development activity and unused

credit facilities of NOK5,460m, OLT's credit profile remains strong. We reaffirm our

'BBB+' rating with a stable outlook on the name.

http://danskeanalyse.danskebank.dk/abo/CreditUpdateNykreditBankQ114190514/$file/CreditUpdate_NykreditBank_Q114_190514.pdf

http://danskeanalyse.danskebank.dk/abo/CreditUpdateAPMMQ114210514/$file/CreditUpdate_APMMQ114_210514.pdf

http://danskeanalyse.danskebank.dk/abo/CreditUpdateOlavThonEiendomsselskapQ114220514/$file/CreditUpdate_OlavThonEiendomsselskap_Q114_220514.pdf


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Ratings from Standard & Poor’s, Moody’s and Fitch and Danske Bank markets shadow ratings

Source: Standard & Poor’s, Moody’s, Fitch, Danske Bank Markets

Akelius Residential Ab BB+ Pos BB Louis LandemanAmbu A/S BBB- Stable Jakob MagnussenAp Moeller - Maersk A/S BBB+ Stable Baa1 Stable Brian Børsting BUYArla Foods Amba BBB+ Stable Mads RosendalAtlas Copco Ab A Stable A2 Stable Mads Rosendal SELLAvinor As AA- Stable A1 Stable Åse Haagensen HOLDBank 1 Oslo Akershus As BBB+ Stable T. Hovard / L. HolmBwg Homes Asa BB Stable BB- Nils AspeliCargotec Oyj BBB- Stable Kasper F. LarsenCarlsberg Breweries A/S Baa2 Stable BBB Stable Brian Børsting SELLCermaq Asa BB Stable Knut-Ivar BakkenColor Group As BB- Stable B+ Kasper F. LarsenDanske Bank A/S A Neg Baa1 Pos A StableDlg Finance As BB- Stable Mads RosendalDfds A/S BB+ Stable Kasper F. LarsenDna Ltd BBB- Stable Kasper F. LarsenDnb Bank Asa A+ Stable A1 Stable T. Hovard / L. Holm HOLDDong Energy A/S BBB+ Stable Baa1 Stable BBB+ Stable Jakob Magnussen BUYDsv A/S BBB Stable Brian BørstingEg Holding B Stable Jakob MagnussenEika Boligkreditt As A- Stable Nils AspeliEika Gruppen As BBB Stable Nils AspeliElectrolux Ab BBB+ Neg Wr WD Brian Børsting HOLDElisa Oyj BBB Pos Baa2 Stable Kasper F. Larsen BUYEntra Eiendom As A- Stable Nils AspeliFinnair Oyj BB Stable Brian BørstingFingrid Oyj AA- Neg A1 Stable A+ Stable Jakob Magnussen BUYFortum Oyj A- Neg A2 Neg A- Neg Jakob Magnussen SELLFred Olsen Energy Asa BB+ Stable Sondre StormyrG4S Plc BBB- Stable Brian Børsting BUYGetinge Ab BBB- Neg Louis LandemanHelgeland Sparebank Baa2 Stable T. Hovard / L. HolmHemso Fastighets Ab BBB+ Stable Wiveca SwartingHusqvarna Ab BBB- Stable Louis LandemanInvestor Ab AA- Stable A1 Stable Brian Børsting BUYIss A/S BBB- Stable Baa3 Stable Brian Børsting HOLDJernhusen Ab A- Stable Gabriel BerginJ Lauritzen A/S B Stable B- Åse HaagensenJyske Bank A/S A- Stable Baa1 Stable Thomas M. Hovard BUYKesko Oyj BBB Stable Mads RosendalKlaveness Ship Holding As BB- Stable B+ Bjørn Kristian RøedMeda Ab BB Pos Louis LandemanMetsa Board Oyj B+ Stable B2 Pos Mads RosendalMetso Oyj BBB Stable Baa2 Neg Mads Rosendal BUYMjolby-Svartadalen Energi Ab BBB+ Watch Louis LandemanNcc Ab BBB- Stable Louis LandemanNeste Oil Oyj BBB- Stable Jakob Magnussen HOLDNokia Oyj BB Pos Ba2 Stable BB Stable Kasper F. Larsen HOLDNokian Renkaat Oyj A- Stable Jakob MagnussenNordea Bank Ab AA- Neg Aa3 Stable AA- Stable T. Hovard / L. Holm SELLNorth Atlantic Drilling Ltd BB Stable BB- Sondre StormyrNorwegian Property Asa BBB- Stable Nils AspeliNykredit Bank A/S A+ Neg Baa2U Stable A Stable T. Hovard / L. Holm BUYOdfjell Se B+ Stable B Bjørn Kristian RøedOlav Thon Eiendomsselskap Asa BBB+ Stable Nils AspeliOlympic Shipping As B+ Stable B Åse HaagensenOutokumpu Oyj B- Pos Mads RosendalOrkla Asa BBB+ Pos Nils AspeliPohjola Bank Plc AA- Aa3 Stable A+ Stable T. Hovard / L. Holm SELLPostnord Ab BBB+ Stable Gabriel BerginProsafe Se BB Stable Åse HaagensenRamirent Oyj BB+ Stable Brian BørstingSaab Ab BBB+ Stable Wr Wiveca SwartingSampo Baa2 Stable T. Hovard / L. Holm HOLDSandnes Sparebank BBB+ Stable T. Hovard / L. Holm HOLDSandvik Ab BBB Stable Mads Rosendal HOLDSas Ab B- Stable Wr Pos Brian BørstingSbab Bank Ab A Neg A2 T. Hovard / L. Holm HOLDScania Ab A- Pos Mads Rosendal HOLDSchibsted Asa BBB Stable Nils AspeliSeadrill Ltd BB+ Stable BB Sondre StormyrSecuritas Ab BBB Stable Wr Brian Børsting HOLDSkandinaviska Enskilda Banken Ab A+ Neg A1 Stable A+ Stable T. Hovard / L. Holm BUYSkanska Ab BBB+ Stable Louis Landeman


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Ratings from Standard & Poor’s, Moody’s and Fitch and Danske Bank Markets shadow ratings

Source: Standard & Poor’s, Moody’s, Fitch, Danske Bank Markets

Skf Ab BBB+ Stable Baa1 Stable Mads Rosendal BUYSolstad Offshore Asa BB- Stable B+ Åse HaagensenSparebank 1 Nord Norge A2 Stable A Stable T. Hovard / L. Holm HOLDSparebank 1 Smn A2 Stable A- Stable T. Hovard / L. Holm HOLDSparebank 1 Sr Bank Asa A2 Stable A- Stable T. Hovard / L. Holm HOLDSpar Nord Bank A/S BBB+ Stable T. Hovard / L. HolmSponda Oyj BBB- Stable Louis LandemanStatkraft Sf A- Stable Aaa Stable Jakob Magnussen BUYStatnett Sf A+ Stable Wr Stable Jakob Magnussen HOLDStatoil Asa AA- Stable Aa2 Stable Jakob Magnussen SELLStena Ab BB Stable B2 Stable Brian Børsting BUYStockmann Oyj Abp BB- Neg Mads RosendalStolt-Nielsen Ltd BB+ Stable BB Bjørn Kristian RøedStora Enso Oyj BB Stable Ba2 Neg BB- Stable Mads Rosendal HOLDSuomen Hypoteekkiyhdistys A- Stable T. Hovard / L. HolmSwedavia Ab A- Stable Gabriel BerginSwedbank Ab A+ Neg A1 Stable A+ Stable T. Hovard / L. Holm BUYSwedish Match Ab BBB Stable Baa2 Stable Brian Børsting HOLDSvenska Cellulosa Ab Sca A- Stable Baa1 Stable Mads Rosendal SELLSvensk Fastighetsfinansiering Ab BBB Stable Louis LandemanSvenska Handelsbanken Ab AA- Neg Aa3 Stable AA- Stable T. Hovard / L. Holm HOLDSydbank A/S Baa1 Stable T. Hovard / L. Holm HOLDTallink Group As BB Stable BB- Jakob MagnussenTalvivaara Mining Co Plc C Mads RosendalTdc A/S BBB Stable Baa2 Stable BBB Stable Kasper F. Larsen HOLDTeekay Offshore Partners Lp BB- Stable B+ Kasper F. LarsenTele2 Ab BBB Stable Kasper F. LarsenTelefonaktiebolaget Lm Ericsson BBB+ Neg Baa1 Stable BBB+ Neg Kasper F. Larsen HOLDTelenor Asa A- Pos A3 Stable Kasper F. Larsen HOLDTeliasonera Ab A- Stable A3 Stable A- Stable Kasper F. Larsen SELLTeollisuuden Voima Oyj BBB Stable Wr BBB Stable Jakob Magnussen BUYThon Holding As BBB+ Stable Nils AspeliUpm-Kymmene Oyj BB Pos Ba1 Stable BB Stable Mads Rosendal HOLDVasakronan Ab BBB+ Stable Louis LandemanVattenfall Ab A- Stable A3 Stable A- Neg Jakob Magnussen HOLDVestas Wind Systems A/S BBB- Pos Kasper F. Larsen BUYVolvo Ab BBB Neg Baa2 Neg BBB Stable Mads Rosendal BUYWilh Wilhelmsen Asa BBB- Stable Bjørn Kristian RøedYit Oyj B+ Neg Louis Landeman


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Henrik René Andresen

Credit Portfolios (+45) 45 13 33 27 [email protected]

Brian Børsting

Industrials (+45) 45 12 85 19 [email protected]

Mads Rosendal

Industrials, Pulp & Paper (+45) 45 14 88 79 [email protected]

Lars Holm

Financials (+45) 45 12 80 41 [email protected]

Jakob Magnussen

Utilities, Energy (+45) 45 12 85 03 [email protected]

Åse Haagensen

High Yield, Industrials (+47) 22 86 13 22 [email protected]

Fixed Income Credit Research

Louis Landeman

TMT, Industrials (+46) 8 568 80524 [email protected]

Thomas Hovard

Head of Credit Research (+45) 45 12 85 05

[email protected]

Find the latest Credit Research

Danske Bank Markets: Bloomberg: http://www.danskebank.com/danskemarketsresearch DRCR<GO>

Gabriel Bergin

Strategy, Industrials (+46) 8 568 80602 [email protected]

Kasper From Larsen

High Yield, TMT (+45) 45 12 80 47 [email protected]

Bjørn Kristian Røed

Shipping (+47) 85 40 70 72 [email protected]

Nils Henrik Aspeli

Real Estate, Industrials (+47) 85408433 [email protected]

Wiveca Swarting

Real Estate, Construction (+46) 8 568 80617 [email protected]

Sondre Dale Stormyr

Offshore rigs (+47) 85 40 70 70 [email protected]









http://www.danskebank.com/danskemarketsresearch








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Disclosures

This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske

Bank’). The author of this research report is Jakob Magnussen, Senior Analyst.

Analyst certification

Each research analyst responsible for the content of this research report certifies that the views expressed in this

research report accurately reflect the research analyst’s personal view about the financial instruments and issuers

covered by the research report. Each responsible research analyst further certifies that no part of the compensation

of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed

in the research report.

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(UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation

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investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate

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Financial models and/or methodology used in this research report

Calculations and presentations in this research report are based on standard econometric tools and methodology

as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be

obtained from the authors on request.

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Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis

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See the front page of this research report for the date of first publication.

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