Norwegian Credit Market Overview

Transcription

1 Norwegian Credit Market Overview 7 November 217 Haseeb Syed Bendik Engebretsen David Boyle Head of Credit Research Norway Credit Research Analyst Credit Research Analyst Phone Phone Phone Mobile Mobile Mobile haseeb.syed@danskebank.com bee@danskebank.com dboy@danskebank.com Denmark HolmensKanal Copenhagen K Finland Pohjoisesplanadi 37A 1 Helsinki Norway Bryggetorget 4 17 Oslo Sweden Norrmalmstorg Stockholm United Kingdom 75 King William Street London EC4N 7DT 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 Investment Research Important disclosures and certifications are contained from page 17 of this report.

2 Moody s corporate credit spreads spreads back to tight levels Relative pricing Moody s B spreads over LIBOR by maturity (bp) 3 years 5 years 7 years Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Moody s five-year premiums by rating (bp)* Aaa Aa2 A2 Baa2 Ba2 B2 Caa-C Aaa Aa A Baa Ba B Caa-C * Premiums calculated as bp Low rating bp High rating. Source: Moody s Investor Service, Danske Bank DCM Research (all charts) Moody s BBB spreads over LIBOR by maturity (bp) 3 Year 5 Year 7 Year Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Moody s five-year spreads over LIBOR by rating (bp) Baa2 Ba2 B Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 2

3 Average spread (bps) Average spread (bps) bps over base rate bps over base rate Norwegian five-year B index up some 2bps in October; five-year BBB index remains stable European vs Norwegian high-yield spreads (bp) European vs Norwegian investment-grade spreads (bp) 1,5 5-Years NOK BB spread index 5-Years NOK B spread index itraxx Crossover 2 15 NOK 5-year A-index NOK 5-year BBB-index itraxx Main 1, Relative pricing Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 NOK BB spread curves: YTD spread tightening bps tightening Years to maturity BB curve November 217 BB curve January 217 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 NOK IG spread curves: YTD spread tightening Years to maturity BBB curve November 217 BBB curve January 217 Source: Bloomberg, Danske Bank DCM Research (all charts) 3

4 bps bps bps USD/bbl bps USD/bbl Norwegian five-year B index up some 2bps in October; five-year BBB index remains stable Relative pricing Norwegian investment grade vs oil price (Brent) NOK 5-year A-index 19 NOK 5-year BBB-index 7 17 Brent spot (r.h.a) Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 5Y senior financials vs Norwegian corporate IG (bp) NOK 5-year A-index 17 NOK Senior financials Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Norwegian high yield vs oil price (Brent) Years NOK BB spread index 5-Years NOK B spread index Brent spot (r.h.a) 3 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Norwegian senior financials and municipalities (bp) NOK Senior financials Oslo municipality OMF index Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov Source: Bloomberg, Danske Bank DCM Research (all charts) 4

5 (NOKbn) AuM (NOKbn) (NOKbn) AuM (NOKbn) Notable outflows in HY in September High yield outlows of c.nok44m in September: largest HY outflows YTD. IG inflows continue at decent levels Norwegian high-yield fund flows Norwegian investment-grade fund flows Relative pricing Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 The 1 largest high-yield funds AuM (YTD change, NOKm AuM)* Handelsbanken Høyrente DNB High Yield Holberg Kreditt Pareto Høyrente Storebrand Rente+ First Høyrente SR-Rente Borea Høyrente Alfred Berg Høyrente CII (NOK) Eika Kreditt Sum HY flows HY AuM -22%, 2,274-3%, 2,141 47%, 1,744 9%, 1, %, 1,323-3%, 1,132 51%, 1, %, 4,361 8 Sum IG flows IG AuM Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 28%, 6,939 5%, 6,927 Source: Verdipapirforbundet, Danske Bank DCM Research (all charts) 5

6 Issued volumes YTD (NOKbn) Primary corporate IG activity over past four months Primary market 217: corporate IG bond volumes Corporate IG bond issuance by sector Relative pricing Jul Aug Sep Oct Selected corporate investment-grade bond settlements last month Real Estate Utilities Transportation Convenience Goods Jul-Sep issuances (NOKbn) Oct issuances (NOKbn) Issued Outstanding Settlement Maturity Base rate / ISIN Issuer (NOKm) (NOKm) Currency Date Date Risk Coupon (%) Coupon type Issue Type NO AKA AS 5 5 NOK Oct-17 Oct-22 Senior Secured 3.5 Fixed Bonds XS Assa Abloy AB 2 2 NOK Oct-17 Oct-27 Senior Unsecured 2.68 Fixed Bonds NO Eidsiva Energi AS NOK Oct-17 Oct-23 Senior Unsecured.84 NIBOR 3 Month Bonds NO18825 Forskningsveien II AS NOK Oct-17 Oct-26 Senior Secured 3.7 Fixed Bonds NO Fredrikstad Energi AS 4 4 NOK Oct-17 Oct-22 Senior Unsecured 1.15 NIBOR 3 Month Bonds NO Lyse AS 3 3 NOK Oct-17 Oct-29 Senior Unsecured 3.8 Fixed Bonds NO Offentlig Bygg Bodø 1 AS 2 18 NOK Oct-17 Sep-26 Senior Secured 3.8 Fixed Bonds NO Oslo Kontoreiendom II Holding AS NOK Oct-17 Dec-29 Senior Secured 4.15 Fixed Bonds 6 Note: Settlement date may differ from the date of the transaction Source: Stamdata, Danske Bank DCM Research (all charts and table)

7 Issued volumes YTD (NOKbn) Primary corporate HY activity over past four months Primary market 217: corporate high-yield bond volumes Corporate HY bond issuances by sector Relative pricing Jul Aug Sep Oct Selected corporate high-yield bond settlements last month Shipping Telecom/IT Real Estate Oil and gas E&P Seafood Health Care Industry Jul-Sep issuances (NOKbn) Oct issuances (NOKbn) Issued Outstanding Settlement Maturity Base rate / ISIN Issuer (NOKm) (NOKm) Currency Date Date Risk Coupon (%) Coupon type Issue Type NO Bulk Industrier AS 1 5 NOK Oct-17 Dec-18 Senior Secured 7. NIBOR 3 Month Bonds NO Danefjellveien 12 AS NOK Oct-17 Oct-22 Senior Secured 4.33 Fixed Bonds NO18569 Danefjellveien 12 AS NOK Oct-17 Oct-22 Senior Secured 6. Fixed Bonds NO Grundingen Fastighets AB 8 8 USD Oct-17 Oct-21 Senior Secured 6. Fixed Bonds NO HI Bidco AS NOK Oct-17 Jan-23 Senior Secured 8. NIBOR 3 Month Bonds NO HI Bidco AS 1, 1, NOK Oct-17 Oct-22 Senior Secured 5.5 NIBOR 3 Month Bonds NO Hospitality Invest AS NOK Oct-17 Oct-22 Senior Unsecured 6. NIBOR 3 Month Bonds NO18792 Ice Group Scandinavia 1,4 1,4 NOK Oct-17 Oct-21 Senior Secured 4.6 NIBOR 3 Month Bonds NO Holdings OSX3 Cayman AS Limited USD Oct-17 Oct-18 Senior Unsecured 35. Fixed Bonds NO Tulip Oil Netherlands Offshore EUR Oct-17 Oct-22 Senior Secured 8.5 EURIBOR 3 Bonds NO B.V. Wallenius Wilhelmsen Logistics ASA 1, 1, NOK Oct-17 Oct-22 Senior Unsecured 3. NIBOR 3 Month Bonds Note: Settlement date may differ from the date of the transaction. Source: Stamdata, Danske Bank DCM Research (all charts and table) 7

8 Traded volumes (NOKbn) Traded volumes (NOKbn) Little liquidity in HY bonds at discount over the summer. Longer IG bonds gaining traction Corporate high-yield secondary market traded volumes (NOKm) Price intervals for traded corp. HY volumes Aug Sep Oct < >1 1% 8% 6% 2 4% % % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Relative pricing Corporate IG secondary market traded volumes (NOKm) Maturity intervals for traded corp. IG volumes (years) Aug Sep Oct > 5 1% 8% 6% 4% 2% % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Note: Figures include volumes from taps and repurchases Source: Oslo Børs, Danske Bank DCM Research (all charts) 8

9 Traded volumes and spreads for the most liquid bonds in October Relative pricing Volumes and spreads for most traded shipping bonds Average spread Traded volumes (NOKm) Traded volumes in AMTI1 (99.3) TKLNG3 (99.1) TOP2 (11.6) EULU1 (1.3) TOP5 (99.3) TKLNG4 (13.5) SNI5 (99.5) ODF8 (11.6) SBULK1 (1.1) GOLP3 (99.5) Volumes and spreads for most traded in other* HY industries Figures may include tap issuances and repurchases. *Note: In brackets the last traded price; other industries include the sectors of consumer and convenience goods, transportation, industry, auto, telecom and more Source: Oslo Børs, Danske Bank DCM Research (all charts) , Average spread (bps) Average spread Traded volumes (NOKm) Traded volumes in NHC1 (1.9) COLG1 PRO (15.4) HOIN1 (12.3) IGSH1 (99) GEP1 (88) CRAYON2 (13) NAS7 (99.8) DNO1 (98.1) DETNOR2 (117.4) VVH1 (1.5) , Average spread (bps) Volumes and spreads for most traded oil service bonds Average spread Traded volumes (NOKm) Traded volumes in BON6 (99.5) BWO4 (96) SDRL8 (14.8) SONG4 (13.9) BLH2 PRO (1.8) BON3 (13.5) BWO3 (95) FOE5 (62.5) BON5 (11.6) SIOFF2 (73) , Average spread (bps) Volumes and spreads for most traded corp. IG names Average spread Traded volumes in Oct Kongsberg Gruppen ASA (1.9) Yara International ASA (15.4) Fjellinjen AS (12.3) Agder Energi AS (99) Thon Holding AS (88) Entra ASA (13) Akershus Energi AS (99.8) Statkraft AS (98.1) Schibsted ASA (117.4) Vasakronan AB (publ) (1.5) Traded volumes (NOKm) Average spread (bps) 9

10 Mid price Relative value in the oil service industry Time to maturity over prices oil service industry 1 BON3 AWDR1 BON5 PGS 218 BLH2 PRO BWO1 SONG4 DEED1 RET BWO2 BWO3 SONG5 BON6 BWO4 8 SIOFF2 EMGS2 HAVI7 6 FOE5 SOFF4 Relative pricing (1) 4 HAVI4 2 NADL1 IOSH1 PRO SDRL8 BOAO2 PRO TTM (yrs) Average TTM Average Mid Price Time to maturity (years) Based on mid-price (all charts). Source: Bloomberg, Oslo Børs, Danske Bank DCM Research 1

11 Mid price Relative value in the oil service industry profitability versus price LTM EBITDA margin over bond prices oil service industry 1 PGS 218 BWO1 BWO2 BWO3 BWO4 SONG4 SONG5 BLH2 PRO DEED1 RET AWDR1 BON3 BON6 BON5 8 6 FOE5 Relative pricing (2) 4 2 BOAO2 PRO NADL1 SDRL8 EBITDA margin Average EBITDA margin Average Mid Price 2% 3% 4% 5% 6% 7% 8% 9% 1% LTM EBITDA margin Based on mid-price. Source: Bloomberg, Oslo Børs, Danske Bank DCM Research 11

12 Relative value in the oil services industry leverage versus price LTM net debt/ebitda over bond prices oil service industry 1 8 BON3 AWDR1BON5 BON6 BLH2 PRO SONG4 SONG5 PGS 218 BWO2 BWO3 BWO1 BWO4 DEED1 RET Relative pricing (3) Mid price 6 4 FOE5 NIBD/EBITDA Average NIBD/EBITDA Average Mid Price 2 SDRL8 NADL LTM NIBD/EBITDA Based on mid-price Source: Bloomberg, Oslo Børs, Danske Bank DCM Research 12

13 Mid spread over 3MN (bps) Relative value in the shipping industry Time to maturity over quoted spread shipping industry 7 TTM (yrs) 6 GOLP2 Average TTM Average Mid spread 5 TOP5 HLNG2 TKLNG3 ODF8 GLOG2 HLNG3 TKLNG4 Relative pricing (4) TKLNG2 ODF6 SFLN3 OCY2 SNI4 ODF7 SNI6 OCY3 SNI5 OCY4 WWI19 PRO WWI23 1 WWI22 A.P. Møller Time to maturity (years) Source: Bloomberg, Oslo Børs, Stamdata, Danske Bank DCM Research 13

14 Mid spread over 3MN (bps) Relative value in the shipping industry profitability versus spread LTM EBITDA margin over quoted spread shipping industry 7 6 EBITDA MARGIN Average EBITDA margin Average Mid spread GOLP2 5 ODF8 HLNG3 HLNG2 TOP5 GLOG2 TKLNG4 Relative pricing (5) SNI5 ODF7 SNI6 WWI19 PRO SNI4 ODF6 SFLN3 TKLNG3 TKLNG2 OCY4 OCY3 OCY2 1 WWI23 A.P. Møller WWI22 A.P. Møller A.P. Møller % 1% 2% 3% 4% 5% 6% 7% 8% 9% 1% LTM EBITDA margin Source: Bloomberg, Oslo Børs, Stamdata, Danske Bank DCM Research 14

15 Mid spread over 3MN (bps) Relative value in the shipping industry leverage versus spread LTM net debt/ebitda over quoted spreads shipping industry 7 NIBD/EBITDA 6 GOLP2 Average NIBD/EBITDA Average Mid spread 5 HLNG3 HLNG2 TOP5 ODF8 GLOG2 TKLNG4 Relative pricing (6) WWI19 PRO OCY4 SNI5 OCY3 SNI6 SNI4 OCY2 ODF7 SFLN3 ODF6 TKLNG3 TKLNG2 1 A.P. Møller A.P. Møller A.P. Møller WWI23 WWI LTM NIBD/EBITDA Source: Bloomberg, Oslo Børs, Stamdata, Danske Bank DCM Research 15

16 Fixed Income Credit Research team Thomas Hovard Head of Credit Research hova@danskebank.com Henrik René Andresen Credit Portfolios hena@danskebank.com Gabriel Bergin Strategy, Financials gabe@danskebank.com Brian Børsting Industrials brbr@danskebank.com David Boyle Industrials & Norwegian HY dboy@danskebank.com Jesper Damkjær Financials damk@danskebank.com Bendik Engebretsen Industrials & Norwegian HY bee@danskebank.com Christopher Hellesnes General Industrials cahe@danskebank.se Katrine Jensen Financials katri@danskebank.com Louis Landeman Industrials, Real Estate llan@danskebank.com Jakob Magnussen Utilities, Energy jakja@danskebank.com August Moberg Industrials & Construction aumo@danskebank.com Niklas Ripa Credit Portfolios niri@danskebank.com Mads Rosendal Industrials, TMT madro@danskebank.com Haseeb Syed Industrials & Norwegian HY hsy@danskebank.com Find the latest Credit Research: : Danske Bank DCM Research: Bloomberg: DNSK<GO> 16

17 Disclosures This research report has been prepared by Danske Bank DCM Research, a division of Danske Bank A/S ( Danske Bank ). The authors of this research report are Haseeb Syed (Senior Analyst), Bendik Engebretsen (Analyst) and David Boyle (Analyst). Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the 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. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. Danske Bank s research reports are prepared in accordance with the recommendations of the Danish Securities Dealers Association. Danske Bank is not registered as a Credit Rating Agency pursuant to the CRA Regulation (Regulation (EC) no. 16/29). Hence, Danske Bank does not comply with nor seek to comply with the requirements applicable to Credit Rating Agencies. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment management, investment banking, custody and other financial services activities, may be a lender to the companies mentioned in this publication and have whatever rights are available to a creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit or other information regarding the companies mentioned in this publication that is not available to or may not be used by the personnel responsible for the preparation of this report, which might affect the analysis and opinions expressed in this research report. Completion and first dissemination The completion date and time in this research report mean the date and time when the author hands over the final version of the research report to Danske Bank s editing function for legal review and editing. The date and time of first dissemination mean the date and estimated time of the first dissemination of this research report. The estimated time may deviate up to 15 minutes from the effective dissemination time due to technical limitations. See the final page of this research report for the date and time of first dissemination. Validity time period This communication as well as the communications in the list referred to below are valid until the earlier of (a) dissemination of a superseding communication by the author, or (b) significant changes in circumstances following its dissemination, including events relating to the market or the issuer, which can influence the price of the issuer or financial instrument. 17

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