Weekly credit update - Microsoft · • See Property Sector Update: Sweden and Finland: focus on residentials, 12 September 2016 • See Trade idea - Buy Akelius 2020s in EUR - Buy

Weekly Credit Update

27 September 2016

Important disclosures and certifications are contained from page 34 of this report

Investment Researchwww.danskebank.com/CI

This document is intended for institutional investors and is not subject to all the independence and disclosure standards applicable to debt research reports prepared for retail investors.

Analysts

Haseeb Syed+47 85 40 54 [email protected]

Katrine Jensen+45 45 12 80 [email protected]

22

- General credit market news and current themes

- Credit indicators

- Scandi investment grade

Contents

- Coverage universe, credit ratings and recommendations

- Scandi high yield/unrated

33Source: Bloomberg, Danske Bank Markets (both charts)

What’s on our minds

- General credit market news

• The FOMC maintained the Fed funds target rate at 0.25%-0.50%, in line with consensus and market pricing. Looking at the rate decision, there were three dissenters voting for an immediate hike and since three FOMC members have officially joined the no-hike-this-year camp, we are dealing with a very divided FOMC. International equity markets reacted positively on the news.

• iTraxx 5yr Crossover dipped over the past week from 336bp to 327bp, while iTraxx 5yr Main, after an increase during the week, reverted to 71bp.

• NorgesBank (NB) left the sight deposit rate unchanged at 0.50% . The revised rate path suggests a 40% probability of a later rate cut, versus 100% signaled earlier. The rhetoric in the Monetary Policy Report (MPR) was more hawkish than expected, highlighting the Board's move towards a 'neutral' bias.

• Bank of Japan kept its interest rate unchanged at -0.1%. At the same time, the central bank announced that it is ceasing its duration targets when acquiring government bonds in the QE operations.

• Norwegian HY funds saw a net inflow of NOK7m in August compared to a net inflow of NOK239m in July. IG funds had net inflow of NOK434m in August, down from NOK3.7bn inflows in July. Although we expected to see a stronger net inflow in the HY funds, the overall reading is positive and underlines that Norwegian credit funds are not facing any selling pressure.

44

Weekly purchase volumes Purchased issues, split by country of risk

Source: ECB, Danske Bank Markets Source: ECB, Danske Bank Markets

CSPP UpdatePurchases of EUR2.3bn in the week ending 23 September

Buy NOKIA 2019 USD, trading at wide margin to Nokia 2019 EUR

Published on 23 May 2016

• The weekly purchase volume was somewhat lower last week compared to the most recent weeks, although the monthly run-rate is still above EUR10bn/month. In total, the ECB has now purchased bonds under the CSPP totalling EUR27.9bn.

• In relation to total purchased volume, the average holding of each ISIN (dividing the total purchased amount by the number of ISINs held) has continued to rise to EUR45bn per ISIN.

• See table on the right for newly purchased issues. Some of the new issues were also new issues in the market, indicating a number of primary participations by the ECB.

• In terms of the split of purchases so far, bonds from German issuers represent a much larger share of purchased issues than the ECB’s benchmark would imply, based on outstanding market volumes. Over time, the purchases should reflect the market benchmark.

Bond

Remaining

tenor

Z-

spread

Δ since

announcement*

NOVNVX 0 1/8 09/20/23

7.0 12.47 New issue

NOVNVX 0 5/8 09/20/28

12.0 17.43 New issue

DSM 2 3/8 04/03/24 7.5 27.08 -46.34

KPN 3 1/4 02/01/21 4.3 36.22 -48.54

BMW 1 1/2 06/05/18 1.7 2.09 -30.81

DBHNGR 2 3/4 03/19/29

12.5 10.86 -17.74

DBHNGR 1 5/8 11/06/30

14.1 13.05 -28.77

FERSM 0 3/8 09/14/22 6.0 52.53 n/a

REPSM 2 1/8 12/16/20 4.2 51.11 -180.48

GASSM 3 7/8 04/11/22 5.5 38.60 -76.36

GASSM 3 7/8 01/17/23 6.3 42.02 -77.61

IBESM 0 3/8 09/15/25 9.0 32.29 n/a

AKEFP 4 10/25/17 1.1 15.59 -19.32

MCFP 4 04/06/18 1.5 4.92 -10.30

SUFP 2 1/2 09/06/21 4.9 16.71 -30.49

TTLINF 2.2 08/05/25 8.9 58.08 -86.74

NOVO 1 5/8 09/20/23 7.0 121.58 New issue

ETN 0 3/4 09/20/24 8.0 58.84 New issue

Purchased issues last week

* Spread change since announcement of CSPP in March

Source: ECB, Bloomberg, Danske Bank Markets

AT BE

DE

EE

ES

FIFR

IE

IT

LU

NL

PTSISKGBUS CH

0

5

10

15

20

25

30

35

40

45

50

0

500

1000

1500

2000

2500

3000

Weekly purchase volume Volume held per ISIN

5

Scandi HY/unrated

66

Chart 1. Relative value, indicative mid spreads Chart 2. Twelve month credit spread development vs BBB index

Source: Bloomberg, Danske Bank Markets Source: Bloomberg, Danske Bank Markets

Low credit risk – Buy Akelius 2020s in EUR

- Attractive pricing considering our expectation of a bond upgrade (published 15 September)



Key arguments for the trade

• In coming quarters, we expect Akelius interest costs to continue falling, as the company refinances maturing debt with new cheaper financing. This, together with a forthcoming asset sale, suggests potential for some further improvement in credit metrics (end Q2 reported LTV: 47%; with S&P’s adjustments 53%).

• We also expect Akelius’s secured LTV to decline gradually towards its 25% target for 2018 (end-Q2 33%). In our view, this means that at some stage S&P should remove its notching from Akelius’s bonds.

• Considering the high likelihood of a ratings upgrade, we consider Akelius 3.375% 2020s (currently rated BB+) in EUR to offer an attractive pick-up relative to other European real estate names.

• Akelius has a strategy to focus on growth through investing in low-risk residential properties that generate stable cash flow over time. The company invests most of the free cash flow that it generates in renovating and refurbishing the existing properties or reinvests it in new properties.

• Looking at historical property prices, it appears residential property prices normally decline much less than commercial property prices during an economic downturn. At end June, Akelius unencumbered assets to outstanding bonds and CPs was a high 5.0x.

• See Property Sector Update: Sweden and Finland: focus on residentials,12 September 2016

• See Trade idea - Buy Akelius 2020s in EUR - Buy Victoria Park 2020s in SEK , 15 September 2016

0

20

40

60

80

100

120

140

160

0

50

100

150

200

250

300

350

XS1295537077[ASW 3M]

IBOXX EURO NON FINANCIALS BBB 3 5[ASSETSWAPSPREAD] RHS

SDAVFH (NR/NR) 3,375% '18

SDAVFH (NR/NR) 2,375% '20

SATOYH (NR/NR) 3,375% '19

SATOYH (Baa3/NR) 2,375% '21SATOYH (Baa3/NR)

2,25% '20

COFBBB (NR/NR) 1,929% '22

CITCON (Baa1/BBB) 3,75% '20




ATRSAV (NR/BBB-) 4% '20

ATRSAV (NR/BBB-) 3,625% '22

AKFAST (NR/BB+) 3,375% '20

0

50

100

150

200

250

1 2 3 4 5 6 7 8 9 10 11 12

Ask Spread (EUR)*

YTW**

* Z-spreads. Discount margin for floaters. Swapped to indicated currency. ** Years-to-worst

http://danskeanalyse.danskebank.dk/abo/PropertySector120916/$file/PropertySector_120916.pdf

http://danskeanalyse.danskebank.dk/abo/TradeRecRealEstate150916/$file/TradeRecRealEstate_150916.pdf

77

Chart 1. Relative value, indicative mid spreads Chart 2. Last two months trading in VICPAS ‘18 and ‘20 (price)


Medium credit risk – Buy Victoria Park 2020s in SEK

- Building scale through organic growth and acquisitions (published 15 September)




• We regard the outlook for the residential property market in Sweden as positive, considering the recent population growth, a large shortage of apartments and a strong urbanisation trend. Swedish residential companies on average have a lower leverage than peers in the commercial property segment.

• Considering Victoria Park’s focus on the more stable residential market and its long average debt maturity profile, we consider its bonds to be attractively priced compared with sector peers such as D. Carnegie, Heimstaden and Hemfosa.

• As of end-June, Victoria Park reported a gross LTV (excluding preference shares in debt) of 64% (net LTV 52%). Following recent transactions, we estimate a gross LTV of around 65%.

• Victoria Park is a Swedish real estate company, which specialises in acquiring, developing and managing housing properties in growth areas in Sweden. At the end of June 2016, the market value of Victoria Park’s property portfolio amounted to SEK8.5bn.

• In mid-July, Victoria Park announced its largest acquisition to date, totalling 1,900 apartments in Malmö and Karlskrona for a total price of SEK1.8bn. Earlier this week the company made an equity issue, raising SEK344m in new equity, which to us demonstrates its commitment to its stipulated financial policy (Max LTV: 65%).

• See Property Sector Update: Sweden and Finland: focus on residentials,12 September 2016

• See Trade idea - Buy Akelius 2020s in EUR - Buy Victoria Park 2020s in SEK , 15 September 2016

VICPAS FRN '20 (SEK)

VICPAS FRN '18 (SEK)

SAGAX FRN '21 (SEK)

SAGAX FRN '21 (EUR)

SAGAX FRN '20 (SEK)

SAGAX FRN '20 (EUR)

SAGAX FRN '19 (SEK)

SAGAX FRN '19 (EUR)

SAGAX FRN '18 (SEK)

KLOVSS FRN '20 (SEK)

KLOVSS FRN '19 (SEK)

KLOVSS FRN '18 (SEK)KLOVSS FRN '18

(SEK)

HEIMST FRN '19 (SEK)

FPARSS FRN '20 (SEK)FPARSS FRN '19

(SEK)

FPARSS FRN '19 (SEK)



CORESS FRN '19 (SEK)CORESS FRN '19

(SEK)

CORESS FRN '18 (SEK)

CORESS FRN '17 (SEK)

0

50

100

150

200

250

300

350

400

450

500

0 1 2 3 4 5 6

Mid Spread (SEK)*

YTW**

* Asset swap spread Swapped to indicated currency. ** Years-to-worst

102.5

103

103.5

104

104.5

105

99.8

100

100.2

100.4

100.6

100.8

101

101.2

9009255335 FRN 17JUN2020 9009255335 FRN 03DEC2018

http://danskeanalyse.danskebank.dk/abo/PropertySector120916/$file/PropertySector_120916.pdf

http://danskeanalyse.danskebank.dk/abo/TradeRecRealEstate150916/$file/TradeRecRealEstate_150916.pdf

88

Recent trade ideas (high yield and unrated)

Source: Danske Bank Markets

See the end of this document for a list of our coverage including recommendations.

Type Trade Idea

Opened 15 Sep 2016

Opened 15 Sep 2016

Opened 08 Sep 2016

Opened 17 Aug 2016

Opened 23 May 2016

Opened 23 May 2016

Opened 02 May 2016

Opened 29 Mar 2016

Switch Switch to Volvo hybrids (call 20s

or 23s) from the EUR Volvo

senior curve

VLVY EUR senior curve prices in an upgrade, the hybrids do not.

Buy Victoria Park 2020s in SEK Building scale through organic growth and acquisitions

Switch Buy Kemira 2022s, fund by

selling Kemira 2019s

The spread differential between the Kemira 2019s and 2022s has widened significantly since the end of 2015. A flattening of the Kemira curve indicates potential for at least 20bp tightening, in our view.

Outright Buy Akelius 2020s in EUR Attractive pricing considering our expectation of a bond upgrade

Outright

Outright Buy Nokia USD 5.375% 2019 The USD denominated NOKIA 2019’s trade with a good pickup relative to both the EUR denominated NOKIA 2019’s as well as the ‘BBB-’ industrials curve

Outright Buy DSV DKK 2020 and 2022s The 2022s and the 2020 bonds are trading with 120bp and 108bp spreads to the ‘BBB’ industrial curve, respectively. Even taking into account the unrated status of the bonds and a relatively low liquidity, we believe this is very attractive.

Switch Buy Nokia USD 5.375% 2019

outright and fund by selling Nokia

EUR 6.75% 2019

The USD denominated NOKIA 2019’s trade with a good pickup relative to both the EUR denominated NOKIA 2019’s as well as the ‘BBB-’ industrials curve

Outright Buy Kemira 2019s and 2022s

(EUR)

The Kemira 2019s and 2022s trade with a wide differential to rated peers. Despite Kemira’s unrated status, we believe this differential is too large.

99

Best and worst performers (Nordic coverage universe)- High yield/unrated

Source: Bloomberg, Danske Bank Markets (both charts)

1 month in local currencies YTD in local currencies

24,042

18,012

9,253

5,089

3,808

3,493

3,493

2,947

2,808

2,725

-166

-167

-170

-174

-182

-191

-206

-240

-258

-338

-500050001500025000

Prosafe SE NOK 2017

Farstad Shipping ASA NOK 2017

Olympic Ship AS NOK 2017

Seadrill Ltd NOK 2018

North Atlantic Drilling Ltd NOK 2018


Fred Olsen Energy ASA NOK 2019


Prosafe SE NOK 2018

Seadrill Ltd SEK 2019

Meda AB SEK 2018

Meda AB SEK 2019

Hoegh LNG Holdings Ltd NOK 2017

SSAB AB SEK 2019

Odfjell SE NOK 2018

Hoist Kredit AB EUR 2017

SSAB AB EUR 2019

Outokumpu OYJ EUR 2019

Teekay Offshore Partners LP/Teekay…

Odfjell SE NOK 2017

Change in local currencies (bp)

4,796

3,213

2,455

1,461

1,218

588

578

487

458

210

-42

-45

-47

-51

-51

-65

-79

-90

-91

-118

-10000100020003000400050006000


Fred Olsen Energy ASA NOK 2019


North Atlantic Drilling Ltd USD 2019

North Atlantic Drilling Ltd NOK 2018

Seadrill Ltd USD 2017



Seadrill Ltd NOK 2018

Teekay Offshore Partners LP NOK 2019

Seadrill Ltd USD 2020

Color Group AS NOK 2019

Norwegian Air Shuttle ASA NOK 2018

Ship Finance International Ltd NOK 2019

Hoegh LNG Holdings Ltd USD 2020

Teekay LNG Partners LP NOK 2018

Ocean Yield ASA NOK 2019

Golar LNG Partners LP USD 2020

Teekay LNG Partners LP NOK 2020

Golar LNG Partners LP NOK 2017


1010

Recent Nordic high yield/unrated issuance*

*Excluding increases in existing bond issues (taps)

Source: Bloomberg, Danske Bank Markets

Selected new issues (High yield/unrated)

Date Issuer Coupon CCY Volume Maturity S&P / Mdy / Fitch ASW/DM

23/09/2016 Serneke Group Ab STIB3M +625bps SEK 300 m Sep/19 / / 625

21/09/2016 Jernbanepersonalets Sbk NIBOR3M +52bps NOK 200 m Sep/18 / / 52

16/09/2016 Vastra Malardalen STIB3M +110bps SEK 325 m Sep/20 / / 110

16/09/2016 Entra Asa NIBOR3M +94bps NOK 1 000 m Sep/23 / / 94

14/09/2016 Steen & Strom Asa NIBOR3M +110bps NOK 400 m Mar/23 / / 110

14/09/2016 Sunnhordland Kraftlag As NIBOR3M +114bps NOK 300 m Sep/21 / / 114

13/09/2016 Fastator Ab STIB3M +850bps SEK 250 m Sep/19 / / 850

12/09/2016 Ocean Yield Asa NIBOR3M +450bps NOK 750 m Sep/21 / / 450

09/09/2016 Orkla Asa NIBOR3M +85bps NOK 400 m Mar/23 / / 85

09/09/2016 Orkla Asa 2.35% NOK 200 m Sep/26 / / est. 81

08/09/2016 Atrium Ljungberg Ab STIB3M +88bps SEK 400 m Sep/18 / / 88

08/09/2016 Lillestrom Sparebank NIBOR3M +81bps NOK 200 m Nov/19 / / 81

08/09/2016 Tele2 Ab STIB3M +155bps SEK 1 000 m Mar/22 / / 155

08/09/2016 Odfjell Se NIBOR3M +600bps NOK 500 m Sep/19 / / 600

07/09/2016 Jyske Bank A/S (AT1) STIB3M +580bps SEK 1 250 m PERP / / 580

07/09/2016 Jyske Bank A/S (AT1) CIBO03M +530bps DKK 500 m PERP / / 530

07/09/2016 Bank Norwegian As (AT1) NIBOR3M +525bps NOK 210 m PERP / / 525

07/09/2016 Swedavia Ab 0.435% SEK 250 m Sep/20 / / est. 56

06/09/2016 Totens Sparebank NIBOR3M +87bps NOK 200 m Sep/21 / / 87

06/09/2016 Sparebanken Telemark NIBOR3M +85bps NOK 200 m Sep/21 / / 85

01/09/2016 Jaren Sparebank NIBOR3M +102bps NOK 250 m Sep/21 / / 102

01/09/2016 Tronderenergi As 2.68% NOK 200 m Sep/26 / / est. 128

30/08/2016 Fastpartner Ab STIB3M +450bps SEK 600 m Sep/20 / / 450

30/08/2016 Modum Sparebank NIBOR3M +79bps NOK 200 m Mar/20 / / 79

24/08/2016 Resurs Bank STIB3M +175bps SEK 400 m Aug/19 / / 175

1111

Company news from the past week (high yield/unrated)


Name News Implication

Hoist

Hoist Finance (Ba1 from Moody's on bonds): The Swedish Debt Office, responsible for the Swedish deposit guarantee scheme, has published a proposal for a revised methodology for the calculation of the annual fees to the guarantee scheme. Hoist is affected due to deposit funding corresponding to 80% of its balance sheet. The revised formula takes into account a broad range of risk factors related to the setup of the deposit taking entity and ranks all 100 entities, distributing fees according to this ranking. Hoist would be negatively affected by the inclusion of asset quality, but would probably end up better in terms of the leverage ratio. The magnitude of the effect on annual fees for Hoist should be completely manageable however - assuming Hoist is currently mid-range of possible fees (0.1% of deposits) and would end up in the top of the new range (0.18% of deposits), annual fees would increase by SEK10m (cf. Q2 16 LTM interest expenses of SEK320m). So credit neutral, although it does mean regulators are looking at managing the overall risk taking of institutions within the deposit guarantee scheme.

Credit neutral

Balder

Balder (OW) announced the purchase of a SEK4.2bn portfolio of commercial properties from Anders Hedin Invest AB. The sole lessor is entities within the Anders Hedin Invest group of companies, mainly focused on vehicle sales, service and additional services (Hedin Bil). The acquisition will be paid in part (SEK1.1bn) through an offset issue to Anders Hedin Invest AB, who will thus become one of the largest owners in Balder, and a private placement of approximately SEK700m in B-shares (based on 19 September's close). A pro-forma calculation based on end-Q2 figures (and including 100% of Sato) yields no change to LTV following this transaction, reinforcing our view of Balder as committed to maintaining a relatively strong balance sheet. We maintain our Overweight recommendation on Balder's SEK bonds.

Credit neutral

12

Scandi investment grade

1313

Chart 1. Relative value (EUR), indicative mid spreads Chart 2. Credit spread development


Trade idea – Carlsberg revisitedPublished 30 August 2016




• On 27 May 2016, we launched a trade idea in which we recommended to buy the Carlsberg EUR2024 outright or fund it by selling the Carlsberg EUR2019 against. We revisit the trade idea below as we believe the fundamental case has improved further following the H1 16 report from Carlsberg.

• Carlsberg reported net debt to EBITDA of 2.2x in H1 16 – the lowest leverage level since Q3 10.

• Carlsberg now has lower reported net debt to EBITDA than ‘BBB+’ rated Heineken.

• Carlsberg’s leverage of 2.2x is still above the company target of <2.0x. We continue to believe it is a key priority for the relatively new management team to continue to strengthen the balance sheet and deliver on the leverage target.

• We believe that Carlsberg will reach the <2.0x leverage target as of end-2016. If so, we believe that Moody’s will remove the Negative Outlook on the Baa2 rating. We expect this to support spread levels - especially in the longer end of the curve.

• We continue to see attractive value in the EUR2024.

• See Trade recommendation - Carlsberg EUR 2024 revisited –

BUY, 30 August

http://danskeanalyse.danskebank.dk/abo/TradeRecommendationCarlsberg300816/$file/TradeRecommendation_Carlsberg_300816.pdf

1414

Recent trade ideas (investment grade)


See the end of this document for a list of our coverage including recommendations

Recent ideasType Trade Idea

Opened 30 Aug 2016

Opened 30 Aug 2016

Opened 09 Aug 2016

Opened 27 Jun 2016

Opened 03 Jun 2016

Opened 03 Jun 2016

Opened 18 Apr 2016

Opened 29 Feb 2016Outright Buy INVSA EUR 4.875% 2021 Spread on the INVSA 2021 has widened recently and is too wide compared with average spreads for industrials with high (AA) ratings.

Outright Buy Danfoss 1.375% 2022

(EUR)

The spread on the DNFSDC 22s trades wider than the ‘BBB’ fair value curve and is rated ‘BBB’ with stable outlook by S&P.

Outright Buy SEB AT1 USD 5.75% call

2020

SEB's AT1 USD 5.75% call 2020 has underperformed closest peers recently resulting in about 50bp pick up to Swedbank's'20 or SHB's '21 and about 30bp to Nordea's '21

Outright Buy Maersk EUR 2021 Maersk EUR 2021 is trading wider than the BBB- industrial curve vs. Maersks BBB+/NO rating.

Switch Buy Maersk EUR 2021 and fund

by selling Maersk EUR 2019

Pick-up is c. 40bp for around 1.5 years of maturity extension.

Buy Carlsberg EUR 2024 and

fund it by selling Carlsberg EUR

2019 (revisited)

We recommended to buy the Carlsberg EUR2024 and fund it by selling the Carlsberg EUR2019. The fundamental case has improved further following the H1 16 report from Carlsberg.

Switch Buy DONGAS 3% call 2020 and

fund by selling DONGAS 4.875%

call 2018

The DONGAS 3% call 2020 have clearly underperformed the DONGAS 4.875% call 2018 in the past 6 months. This is unjustified biven the benign newsflow in DONG Energy

Outright Buy Carlsberg EUR 2024

(revisited)

We recommended to buy the Carlsberg EUR2024. The fundamental case has improved further following the H1 16 report from Carlsberg.

Switch

1515

Best and worst performers (Nordic coverage universe)- Investment grade

Source: Bloomberg, Danske Bank Markets (both charts)

1 week in local currencies 1 month in local currencies

17

10

8

7

7

7

7

6

5

5

-2

-2

-3

-3

-4

-4

-6

-8

-8

-13

-15-10-505101520

Fortum Varme Holding samagt med…

Swedish Match AB SEK 2020

DNB Bank ASA EUR 2021

Skandinaviska Enskilda Banken AB EUR…

Svenska Handelsbanken AB EUR 2020


Vattenfall AB EUR 2024


Swedbank AB EUR 2022

Nordea Bank AB EUR 2020

SpareBank 1 SR-Bank ASA EUR 2021

Lansforsakringar Bank AB SEK 2020

SBAB Bank AB SEK 2018

Swedbank AB SEK 2020

Statkraft AS EUR 2017

Swedbank AB SEK 2018

SBAB Bank AB SEK 2018

Sampo Oyj SEK 2020

Statkraft AS NOK 2020



16

13

12

11

10

9

9

8

6

6

1

1

1

1

1

1

0

0

0

0

-505101520

Fortum Varme Holding samagt med…

Swedish Match AB SEK 2020

Telia Co AB EUR 2027






Fingrid OYJ EUR 2024

Volvo Treasury AB SEK 2017

Elisa OYJ EUR 2019

Nordea Bank AB EUR 2020


Securitas AB EUR 2018

Fortum OYJ EUR 2019


SpareBank 1 SR-Bank ASA EUR 2020

Skandinaviska Enskilda Banken AB EUR…

Swedbank AB EUR 2020

Jyske Bank A/S EUR 2018


1616

Selected new investment-grade issues**

Source: Bloomberg, Danske Bank Markets

*Estimated

**Excluding increases in existing bond issues (taps)

Date Issuer Coupon CCY Volume Maturity S&P / Mdy / Fitch ASW/DM

23/09/2016 Telecom Italia Spa 3% EUR 1 000 m Sep/25 BB+ / Ba1e / BBB-e 283

23/09/2016 Gecina 1% EUR 500 m Jan/29 BBB+ / Baa1e / 62

23/09/2016 Stangastaden Ab 0.5% SEK 200 m Oct/21 AA- / / 67

23/09/2016 Stangastaden Ab STIB3M +75bps SEK 375 m Oct/21 AA- / / 67

23/09/2016 Basf Se 0.875% EUR 500 m Oct/31 A / A1e / A+ 38

22/09/2016 Bpce Sa 1% EUR 1 000 m Oct/28 A / A2e / A 60

22/09/2016 Bpce Sa 0.375% EUR 750 m Oct/23 A / A2e / A 38

22/09/2016 Aust & Nz Banking Group 0.75% EUR 1 000 m Sep/26 AA- / Aa2e / AA-e -

22/09/2016 Uppsalahem Ab STIB3M +70bps SEK 400 m Sep/21 AA- / / 70

21/09/2016 Mfinance France Sa 1.398% EUR 500 m Sep/20 BBB / / BBBe 157

21/09/2016 Santander Consumer Bank 0.25% EUR 500 m Sep/19 / A3e / A-e 58

20/09/2016 Credit Agricole Assrnces (sub.) 4.75% EUR 1 000 m Sep/48 BBB- / / 435

20/09/2016 Sbab Bank Ab STIB3M +75bps SEK 1 200 m Sep/19 A / A2 / 75

19/09/2016 Lb Baden-Wuerttemberg (Tier 2) 2.875% EUR 500 m Sep/26 / Baa2e / BBB 255

19/09/2016 Koninklijke Dsm Nv 0.75% EUR 750 m Sep/26 A- / A3e / A- 40

19/09/2016 Celanese Us Holdings Llc 1.125% EUR 750 m Sep/23 BBB- / Baa3 / 110

19/09/2016 Klepierre 1.25% EUR 600 m Sep/31 A- / / 60

19/09/2016 Berlin Hyp Ag 0.5% EUR 500 m Sep/23 / A2 / A+ 52

1717

Company news from the past week (investment grade)



Swedish banks

Swedish financial institutions will no longer be allowed to deduct interest expenses on subordinated capital from 2017. This is a tax event, in our view, which makes the Swedish banks able to make early redemptions at par if they want. We do not expect them to do so as it would only make sense for the T2s where the reputational risk is too high. That being said, this event is an uncertainty that is likely to impact prices of all subordinated capital over the coming period. Later during the week, we saw both Swedbank and Handelsbanken stating that they will not use the option for early redemption due to a tax event following the tax change, which confirms our view that the Swedish banks are unlikely to do so.

Credit negative

Avinor

Avinor (MW): S&P has reaffirmed Avinor’s AA- rating but lowered the outlook to Negative from Stable. This is due mainly to a delay in passenger recovery, which is expected to lead to weaker than expected earnings. And combined with accelerated capex in 2016-2017 this is putting some pressure on credit metrics. S&P will review the negative outlook over the next 18 months to see whether credit metrics continue to be commensurate with the stand alone BBB+ rating. S&P continue to apply a four notch uplift to the stand alone credit rating due to the very high likelihood of government support. Overall, we believe Avinor will have enough time to boost earnings with its current cost efficiency programme, which should support earnings and hence credit metrics. We see only little risk of a rating downgrade. Hence we do not expect the Negative outlook to have significant spread impact. We remain Marketweight on Avinor.

Credit neutral

APMM

A.P. Møller - Maersk A/S (APMM) has published its strategic review, which includes the creation of two divisions: Shipping and Energy. The companies within the Energy division are to be separated from APMM within 24 months. Overall, this decreases the level of diversification and, in our view, it is likely that S&P will remove the current one-notch uplift it applies to APMM’s credit rating due to the current diversification. Importantly, APMM states that it is targeting financial ratios in line with an investment grade rating. Previously, APMM targeted ratios in line with a strong investment grade rating. In our view, the target is BBB over the cycle. We believe bonds are trading at fair levels, taking into account the new structure with a higher level of shipping exposure and less diversification combined with the target to stay Investment Grade. Hence, we maintain Marketweight on A.P. Møller–Maersk A/S.

Credit neutral

1818




Ericsson

Ericsson (MW): Unconfirmed reports in Swedish media (Swedish radio and SvD) suggest that Ericsson is allegedly planning to shut down all production in Sweden. An estimated additional 3,000 employees within the Ericsson Device Networking could be forced to leave, a group that last year was reduced by 1,500 employees. The plan would also mean that the last production by Ericsson in Sweden would be shut down. Since last week, Ericsson’s leadership has been in negotiations with the union. On the other hand, Per Norlander, Chief Union negotiator for the Swedish engineers at Ericsson, said to Swedish radio that the news report from SvD is not true at all and that the negotiations are about cost cuts, but there is no decision on how many services need to be removed. This news should be neutral for credit spreads but positive to see that Ericsson is cutting costs to be able to better withstand the current downturn in demand.

Credit neutral

Nordic Banks

The Director of the Danish FSA has been elected a member of the European Banking Authority's (EBA) Management Board, which gives him more power to affect EU regulation and how the Basel rules will be implemented in the EU amongst others. Together with the announcement a couple of weeks back that the Danish FSA has become a member of the Basel Consultative Group, this means that the Danish FSA will have the opportunity to have more influence on regulation. This is credit positive for the Nordic banks as the director is a clear advocate of the use of internal models in measuring credit risk.

Credit positive

Vattenfal

Vattenfall (MW) gets the final go-ahead from the competition authorities to divest its lignite assets to EPH and PPF. A divestment is considered positive by the rating agencies, as it would reduce Vattenfall's adj. net debt and reduce Vattenfall's reliance on the struggling thermal power market. Today's positive nod from the EU is completely in line with expectations. Therefore, only modestly positive.

Credit positive

Telia

Telia (OW): S&P puts Telia's 'A-' rating on creditwatch negative. This comes on the back of the recent SEK12bn settlement proposed by the US and Dutch authorities regarding Telia activities in Eurasia. If the settlement goes through as proposed, Telia would be downgraded by one notch to 'BBB+'. Divestment proceeds could be a mitigating factor but S&P will make its final decision within the next three months. We are slightly surprised by this given that S&P affirmed Telia's rating at the beginning of the year, knowing that the group would face a large cash outlay for the Eurasia dealings. It is likely the size of the fine that has surprised the market and also S&P. Given that most of Telia's longer-dated bonds are already trading at BBB+ level, we do not think this should have too many implications spread-wise.

Credit negative

1919




Vattenfall

Vattenfall hosted its annual capital markets day last week. There was no new larger strategic or financial news offered. The company left the audience with an impression of a Vattenfall in a transformation period, with growth less focused around traditional central power plants and more focused on servicing decentral generation and central renewable generation. Vattenfall also saw itself in a much more robust financial situation compared to a couple of months ago (before the tax relief on nuclear and hydro and before the lignite divestment). Subsequently, the company hinted that it sees very little rating pressure. We interpret this as leading to less likelihood of additional hybrid issuance. We maintain our Marketweight recommendation on Vattenfall.

Credit neutral

20Credit Indicators

Credit indicators

2121

Chart pack: euro spreads and returns

Source: Macrobond Financial, Danske Bank Markets [all charts]

Euro IG ASW, iBoxx indices

Euro HY ASW, Merrill Lynch indices

IG total return, iBoxx indices, 2014-01=100

HY total return, Merrill Lynch indices, 2014-01=100

2222

Chart pack: relative value


iTraxx vs iBoxx

Euro vs US CDS indices - IG (Markit) Euro vs US HY bond indices (Merrill Lynch)

2323

Chart pack: general market development


European swap and government yields

Euro swap curve spread

3M Libor, US and euro area

EUR/USD basis swaps

2424

Chart pack: funds flow


Europe, net sales

Sweden, net sales

US, net sales

Norway, net sales

2525

Chart pack: macro


GDP y/y growth, calendar adjusted

Euro area y/y change in bank lending

Purchasing Manager Indices

Euro area lending standards

26

Coverage universe, credit ratings

and recommendations

2727

Our coverage 1 of 6

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

Ratings from S&P/Moody's/Fitch

Analyst(s)

Company Rating Outlook Rating Outlook Rating OutlookAhlstrom Oyj M. Rosendal / J. MagnussenAkelius Residential Property Ab BBB- Stable L. Landeman / G. Bergin OVERWEIGHTAktia Bank Plc A- Neg A3 Pos L. Holm / K. JensenAlandsbanken Abp BBB Neg L. Holm / K. JensenAmbu A/S J. Magnussen / M. RosendalAp Moeller - Maersk A/S BBB Baa1 Stable B. Børsting/J. Magnussen MARKETWEIGHTArla Foods Amba G. Bergin / L. LandemanAtlas Copco Ab A Stable A2 Stable A Stable B. Børsting / M. Rosendal UNDERWEIGHTAvinor As AA- Neg A1 Stable G. Bergin / L. Landeman MARKETWEIGHTBalder L. Landeman / G. Bergin OVERWEIGHTBank 1 Oslo Akershus As L. Holm / K. JensenBank Norwegian As L. Holm / K. JensenBeerenberg Holdco Ii As Ø. MossigeBillerudkorsnas Ab M. Rosendal / L. LandemanBonum Pankki Oyj BBB Stable L. Holm / K. JensenBrage Finans As L. Holm / K. JensenBw Offshore Ø. MossigeCaruna Networks Oy BBB+ Stable J.Magnussen / L.Landeman OVERWEIGHTCarlsberg Breweries A/S Baa2 Neg BBB Stable B. Børsting / M. Rosendal MARKETWEIGHTCastellum Ab L. Landeman / G. Bergin MARKETWEIGHTCitycon Oyj BBB Stable Baa1 Stable L. Landeman / G. Bergin MARKETWEIGHTColor Group As B. Børsting / M. Rosendal MARKETWEIGHTCom Hem Holding Ab BB Stable M. Rosendal / J. Magnussen OVERWEIGHTCorem Property Group Ab L. Landeman / G. Bergin MARKETWEIGHTDanfoss A/S BBB Stable J. Magnussen / B. Børsting MARKETWEIGHTDanske Bank A/S A Stable A2 Stable A StableDeep Sea Supply Plc Ø. MossigeDestia Group Oy L. Landeman / G. BerginDfds A/S B. Børsting / M. RosendalDlg Finance As M. Rosendal / B. BørstingDna Ltd M. Rosendal / J. MagnussenDnb Bank Asa A+ Neg Aa2 Neg L. Holm / K. Jensen UNDERWEIGHT

Recomm.S&P Moody's Fitch

2828

Our coverage 2 of 6



Analyst(s)

Company Rating Outlook Rating Outlook Rating OutlookDof Asa Ø. MossigeDof Subsea As Ø. MossigeDong Energy A/S BBB+ Stable Baa1 Neg BBB+ Stable J. Magnussen / L. Landeman MARKETWEIGHTDsv A/S B. Børsting / M. RosendalEg Holding J. Magnussen / B. BørstingEidesvik Offshore Asa Ø. MossigeEika Boligkreditt As L. Holm / K. JensenEika Forsikring As L. Holm / K. JensenEika Gruppen As L. Holm / K. JensenEksportfinans Asa BBB Pos Ba3U Stable L. Holm / K. JensenElectrolux Ab BBB+ Stable Wr WD G. Bergin / B. Børsting MARKETWEIGHTElenia Oy BBB J. Magnussen / L. Landeman MARKETWEIGHTElisa Oyj BBB+ Stable Baa2 Stable M. Rosendal / J. Magnussen OVERWEIGHTFarstad Shipping Asa Ø. MossigeFastpartner Ab L. Landeman / G. BerginFelleskjopet Agri Sa B. Børsting / M. RosendalFingrid Oyj A+ Pos A1 Pos A+ Stable J. Magnussen / L. Landeman OVERWEIGHTFinnair Oyj B. Børsting / M. RosendalFortum Oyj BBB+ Stable Baa1 Stable BBB+ Stable J. Magnussen / L. Landeman UNDERWEIGHTFortum Varme Holding Samagt Med Stockholms Stad AbBBB+ Stable J. Magnussen / L. Landeman MARKETWEIGHTFred Olsen Energy Asa S. Stormyr / B.K. RøedG4S Plc BBB- Neg B. Børsting / M. Rosendal MARKETWEIGHTGetinge Ab L. Landeman / G. BerginGolar Lng Partners Lp B.K. Røed / J. MeyerGolden Close Maritime Corp Ltd S. Stormyr / B.K. RøedHavila Shipping Asa Ø. MossigeHeimstaden Ab L. Landeman / G. Bergin NOT RATEDHemso Fastighets Ab A- Stable L. Landeman / G. Bergin MARKETWEIGHTHexagon Ab L. Landeman / G. BerginHkscan Oyj M. Rosendal / B. BørstingHoegh Lng Holdings Ltd B.K. Røed / J. MeyerHoist Kredit Ab Ba1 Stable G. Bergin / L. LandemanHusqvarna Ab L. Landeman / G. Bergin


2929

Our coverage 3 of 6



Analyst(s)

Company Rating Outlook Rating Outlook Rating OutlookIca Gruppen Ab G. Bergin / L. LandemanIkano Bank Ab L. Holm / K. JensenInvestor Ab AA- Stable Aa3 Stable G. Bergin / B. Børsting OVERWEIGHTIss A/S BBB Stable B. Børsting / M. Rosendal OVERWEIGHTJ Lauritzen A/S B.K. Røed / J. MeyerJefast Holding Ab L. Landeman / G. Bergin OVERWEIGHTJernhusen Ab G. Bergin / L. Landeman UNDERWEIGHTJyske Bank A/S A- Stable Baa1U Stable L. Holm / K. Jensen OVERWEIGHTKemira Oyj Wr M. Rosendal / L. LandemanKesko Oyj G. Bergin / L. LandemanKlaveness Ship Holding As B.K. Røed / J. MeyerKlovern Ab L. Landeman / G. Bergin OVERWEIGHTKongsberg Gruppen Ø. MossigeLantmannen Ek For G. Bergin / L. LandemanLoomis Ab B. Børsting / M. RosendalLuossavaara-Kiirunavaara Ab L. Landeman / G. BerginMeda Ab L. Landeman / G. BerginMetsa Board Oyj BB+ Pos Ba2 Stable M. Rosendal / L. Landeman OVERWEIGHTMetso Oyj BBB Stable Baa2 Stable B. Børsting / M. Rosendal MARKETWEIGHTNcc Ab L. Landeman / G. BerginNeste Oyj J. Magnussen / L. Landeman MARKETWEIGHTNibe Industrier Ab G. Bergin / L. LandemanNokia Oyj BB+ Pos Ba1 Stable BB+ Pos M. Rosendal / J. Magnussen OVERWEIGHTNordax Bank Ab L. Holm / K. JensenNordea Bank Ab AA- Neg Aa3 Stable AA- Stable L. Holm / K. Jensen UNDERWEIGHTNorth Atlantic Drilling Ltd S. Stormyr / B.K. RøedNorwegian Air Shuttle Asa B. Børsting / M. RosendalNorwegian Property Asa H. Syed/ B. EngebretsenNykredit Bank A/S A Stable Baa3U Stable A Stable L. Holm / K. Jensen MARKETWEIGHTNynas Group J. Magnussen / L. Landeman OVERWEIGHTObos Bbl H. Syed/ B. Engebretsen MARKETWEIGHTOcean Rig Udw Inc CCC- Neg Ca Neg S. Stormyr / B.K. Røed


3030

Our coverage 4 of 6



Analyst(s)

Company Rating Outlook Rating Outlook Rating OutlookOcean Yield Asa Ø. MossigeOdfjell Se B.K. Røed / J. MeyerOlympic Ship As Ø. MossigeOp Corporate Bank Plc AA- Neg Aa3 Stable WD L. Holm / K. Jensen OVERWEIGHTOrava Residential Reit Plc L. Landeman / G. BerginOrkla Asa H. Syed/ B. EngebretsenOutokumpu Oyj B3 Pos M. Rosendal / L. LandemanPacific Drilling Sa CCC+ Neg Caa2 Neg S. Stormyr / B.K. RøedPetroleum Geo-Services Asa CCC+ Neg Caa1 Neg S. StormyrPostnord Ab G. Bergin / L. LandemanProsafe Se S. Stormyr / B.K. RøedRamirent Oyj B. Børsting / M. RosendalRem Offshore Asa Ø. MossigeSaab Ab Wr G. Bergin / L. LandemanSandnes Sparebank L. Holm / K. JensenSandvik Ab BBB Neg B. Børsting / M. Rosendal MARKETWEIGHTSas Ab B Stable Wr Stable B. Børsting / M. Rosendal OVERWEIGHTSbab Bank Ab A Neg A2 Stable L. Holm / K. Jensen MARKETWEIGHTScania Ab BBB+ Neg M. Rosendal / B. Børsting MARKETWEIGHTSeadrill Ltd S. Stormyr / B.K. RøedSecuritas Ab BBB Stable Wr B. Børsting / M. Rosendal MARKETWEIGHTShip Finance International Ltd Wr B.K. Røed / J. Meyer OVERWEIGHTSiem Offshore Inc Ø. MossigeSkandinaviska Enskilda Banken Ab A+ Stable Aa3 Stable AA- Stable L. Holm / K. Jensen OVERWEIGHTSkanska Ab L. Landeman / G. BerginSkf Ab BBB Neg Baa2 Stable M. Rosendal / G. Bergin MARKETWEIGHTSognekraft As J. Magnussen / L. LandemanSolstad Offshore Asa Ø. MossigeSpar Nord Bank A/S L. Holm / K. JensenSparbanken Skane Ab BBB+ Pos L. Holm / K. JensenSparebank 1 Boligkreditt As L. Holm / K. JensenSparebank 1 Nord Norge A1 Stable A Stable L. Holm / K. Jensen MARKETWEIGHT


3131

Our coverage 5 of 6



Analyst(s)

Company Rating Outlook Rating Outlook Rating OutlookSparebank 1 Smn A1 Stable A- Stable L. Holm / K. Jensen UNDERWEIGHTSparebank 1 Sr-Bank Asa A1 Neg A- Stable L. Holm / K. Jensen UNDERWEIGHTSparekassen Kronjylland L. Holm / K. JensenSponda Oyj L. Landeman / G. Bergin OVERWEIGHTSrv Group Oyj Louis LandemanSsab Ab B+ Stable M. Rosendal / L. Landeman MARKETWEIGHTSt1 Nordic Oy J. Magnussen / L. Landeman OVERWEIGHTStatkraft Sf A- Neg Aaa Stable J. Magnussen / L. Landeman MARKETWEIGHTStatnett Sf A+ Stable Wr Stable J. Magnussen / L. Landeman MARKETWEIGHTStatoil Asa A+ Stable Aa3 Stable J. Magnussen / L. Landeman UNDERWEIGHTStena Ab BB- Neg B3 Stable B. Børsting / M. Rosendal UNDERWEIGHTStockmann Oyj Abp M. Rosendal / G. BerginStolt-Nielsen Ltd B.K. Røed / J. MeyerStora Enso Oyj BB Pos Ba2 Pos WD M. Rosendal / L. Landeman UNDERWEIGHTStorebrand Bank Asa BBB+ Stable Nr Stable L. Holm / K. JensenStorebrand Livsforsikring Group BBB+ Stable Baa1 Stable L. Holm / K. JensenSunnfjord Energi As J. Magnussen / L. LandemanSuomen Hypoteekkiyhdistys BBB Neg L. Holm / K. JensenSvensk Fastighetsfinansiering Ab Louis LandemanSvenska Cellulosa Ab Sca A- Stable Baa1 Neg M. Rosendal / B. Børsting UNDERWEIGHTSvenska Handelsbanken Ab AA- Neg Aa2 Stable AA Stable L. Holm / K. Jensen MARKETWEIGHTSwedavia Ab G. Bergin / L. LandemanSwedbank Ab AA- Neg Aa3 Stable AA- Stable L. Holm / K. Jensen MARKETWEIGHTSwedish Match Ab BBB Stable Baa2 Stable B. Børsting / M. Rosendal OVERWEIGHTSydbank A/S Baa1 Stable L. Holm / K. Jensen OVERWEIGHTTallink Grupp As B. Børsting / J. MagnussenTdc A/S BBB- Stable Baa3 Stable BBB- Stable M. Rosendal / J. Magnussen MARKETWEIGHTTechnopolis Oyj L. Landeman / G. Bergin MARKETWEIGHTTeekay Lng Partners Lp Ø. MossigeTeekay Offshore Partners Lp Ø. MossigeTele2 Ab M. Rosendal / J. MagnussenTelefonaktiebolaget Lm Ericsson BBB+ Neg Baa1 Stable BBB+ Stable M. Rosendal / J. Magnussen MARKETWEIGHT


3232

Our coverage 6 of 6



Analyst(s)

Company Rating Outlook Rating Outlook Rating OutlookTelenor Asa A Stable A3 Stable M. Rosendal / J. Magnussen MARKETWEIGHTTelia Co Ab A- Baa1 Stable A- Stable M. Rosendal / J. Magnussen MARKETWEIGHTTeollisuuden Voima Oyj BB+ Stable Wr BBB Neg J. Magnussen / L. Landeman OVERWEIGHTTopdanmark A/S L. Holm / K. JensenTryg Forsikring A/S L. Holm / K. JensenUpm-Kymmene Oyj BB+ Pos Ba1 Pos WD M. Rosendal / L. Landeman MARKETWEIGHTVasakronan Ab L. Landeman / G. Bergin MARKETWEIGHTVattenfall Ab BBB+ Neg A3 Neg BBB+ Stable J. Magnussen / L. Landeman MARKETWEIGHTVestas Wind Systems A/S J. Magnussen / M. Rosendal OVERWEIGHTVictoria Park Ab L. Landeman / G. Bergin OVERWEIGHTVolvo Ab BBB Stable Baa2 Stable BBB Stable M. Rosendal / B. Børsting MARKETWEIGHTWelltec A/S B Neg B2 Neg S. StormyrWihlborgs Fastigheter Ab L. Landeman / G. Bergin UNDERWEIGHTWilh Wilhelmsen Asa B.K. Røed / J. MeyerYit Oyj L. Landeman / G. Bergin


3333

Fixed Income Credit Research team

Find the latest Credit Research: :

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

Thomas Hovard

Head of Credit Research

+45 45 12 85 05

[email protected]

Gabriel Bergin

Strategy, Industrials

+46 8 568 80602

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Sondre Dale Stormyr

Offshore rigs

+47 85 40 70 70

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Katrine Jensen

Financials

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Jakob Magnussen

Utilities, Energy

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Henrik René Andresen

Credit Portfolios

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Bendik Engebretsen

Industrials

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Brian Børsting

Industrials

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Niklas Ripa

Credit Portfolios

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Louis Landeman

Industrials, Real Estate

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Lars Holm

Financials

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Mads Rosendal

Industrials, TMT

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August Moberg

Industrials & Construction

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Haseeb Syed

Industrials

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Jonas Meyer

Shipping

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[email protected]

3434

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3535

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