Untitled

Credit Trends:
S&P MidCap 400 Credit Profile: Earnings Growth Tempers Rising Debt
Global Fixed Income Research: Diane Vazza, Managing Director, New York (1) 212-438-2760; diane.vazza@standardandpoors.com Evan M Gunter, Associate Director, New York (1) 212-438-6412; evan.gunter@standardandpoors.com
Table Of Contents
Debt, Earnings, And Cash Flow Have Grown Since 2011 The S&P MidCap 400 Has More Than Double The Number Of Speculative-Grade Companies Of The S&P 500 Outlooks Have Improved For Rated Companies In The S&P MidCap 400
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
JULY 19, 2013 1

1163466 | 301674531
Credit Trends:
S&P MidCap 400 Credit Profile: Earnings Growth Tempers Rising Debt
During the first half of 2013, ratings improved for companies in the S&P MidCap 400, with more than three upgrades for each downgrade and a ratings bias that has grown more positive. While the ratings mix of index constituents has been improving, several credit measures, including debt relative to assets, earnings, and cash flow, appear to have weakened slightly for the index in aggregate. The ratings distribution for companies in the S&P MidCap 400 index is slightly stronger than that of rated U.S. companies as a whole (see chart 1). We can see this by comparing the ratings mix: 57% of the rated companies in the S&P 400 are investment grade (rated 'BBB-' and above), compared with only 46% of rated U.S. companies as a whole. In contrast, the S&P 500 has a much stronger credit mix because 88% of its rated companies are investment grade. The median rating for an S&P MidCap 400 company is 'BBB-', one notch higher than the median U.S. corporate rating of 'BB+', but two notches below the S&P 500 median rating of 'BBB+'. Total debt and EBITDA (earnings before interest, taxes, depreciation, and amortization) of the S&P MidCap 400 companies have each grown by 26% since 2010. Over this period, net debt (or total debt minus cash and short-term investments) to EBITDA has expanded to 2.2x, which is considerably higher for the S&P MidCap 400 than for the S&P 500, where it was 1.4x as of the end of the first quarter.
JULY 19, 2013 2

1163466 | 301674531
Credit Trends: S&P MidCap 400 Credit Profile: Earnings Growth Tempers Rising Debt
Chart 1
Debt, Earnings, And Cash Flow Have Grown Since 2011

Since 2009, EBITDA has grown at a 13% compound annual growth rate, though it remained flat in the first quarter. Meanwhile, total debt has grown at a 9% rate over the same period, and cash and short-term investments has increased at a 4% rate (see chart 3). However, since the end of 2011, debt has expanded more quickly, growing 16%, compared with 10% for EBITDA and 14% for cash and short-term investments. Net debt rose 15% as of March 31, 2013, from year-end 2011. In aggregate, the nonfinancial constituents' total net debt divided by total EBITDA rose to 2.2x as of first-quarter 2013 from 2.1x as of year-end 2011. Although net debt to EBITDA (which is a debt payback ratio) increased slightly over the past year, it still remains lower than at the end of 2009, when it reached 2.3x (see chart 2). Total debt rose to $378 billion at the end of 2012 before declining by $12 billion in the first quarter (see chart 3). However, this first-quarter reduction in debt is largely due to changes in index constituents. Ten companies removed from the S&P MidCap 400 so far this year were replaced by companies with $19 billion less in total outstanding debt.
JULY 19, 2013 3

1163466 | 301674531
Chart 2
JULY 19, 2013 4

1163466 | 301674531
Chart 3
The median net debt to EBITDA climbed to 1.4x as of March 31, 2013, from 1.1x as of year-end 2011. The number of companies with net debt of less than zero fell to 89 as of first-quarter 2013 from 95 as of year-end 2011. Meanwhile, the number of companies that have net debt that is less than or equal to their EBITDA fell to 141 from 150. Nonfinancial constituents' debt relative to assets and equity has increased since 2011. Total debt relative to total assets increased to 28% as of first-quarter 2013 from 26% as of year-end 2011, while total debt to total debt plus equity rose to 43% from 42%. However, from 2011 to 2012, adjusted measures such as funds from operations (FFO) and free operating cash flows (FOCF) have been climbing. FFO has steadily increased since 2009, and FFO to debt has risen to 23% from 22% over the same period (see chart 4). FOCF has varied considerably since 2008--more than tripling from 2008 to 2009 then declining again in 2010 (see chart 5). The share of companies with negative FOCF declined to 19% in 2009 from 31% in 2008 despite falling revenues because companies maintained cash from operations and slashed capital expenditures, allowing for higher overall FOCF. As the recession ended in 2009, the economic outlook brightened and companies increased capital expenditures, leading to a slight dip in FOCF in 2010. Since 2010, aggregate FOCF to debt has hovered around 7%.
JULY 19, 2013 5

1163466 | 301674531
To compare these measures, we used credit-adjusted, financial data from CreditStats Direct for nonfinancial rated companies in the S&P MidCap 400 Index. FFO is defined as net income from continuing operations adjusted for depreciation and amortization and other noncash and nonrecurring items, while FOCF can be used as a proxy of a company's cash generated from core operations. Rated companies account for 85% of the nonfinancial constituents' total debt, 73% of total EBITDA, and 63% of total cash and short-term investments. Nonfinancial companies in the S&P MidCap 400 are split nearly equally between investment grade and speculative grade (rated 'BB+' or lower), with 104 companies and 103 companies, respectively. Investment-grade firms have a higher share of EBITDA ($51 billion) than speculative-grade ones ($42 billion). Meanwhile, speculative-grade companies have a higher share of total debt outstanding ($169 billion) than investment-grade ones ($157 billion) (see table 1).
Chart 4
JULY 19, 2013 6

1163466 | 301674531
Chart 5
Table 1
Total Debt, Cash, And EBITDA For S&P MidCap 400 Nonfinancial Companies By Rating Category
($ bil.) Number of companies 8 96 84 19 136 343 Cash and short-term investments 0.8 24.8 29.3 8.4 37.5 100.7
Rating category AAA AA A BBB BB B and Below N.R. Total
Market capitalization 38.6 388.9 278.3 49.0 452.3 1,207.1
Total debt 15.0 142.1 113.6 55.3 56.6 382.5
EBITDA 4.9 47.0 33.4 9.1 34.1 128.4
N.R.--Not rated. S&P MidCap 400 companies from the nonfinancial sectors (including REITs and excluding financial services companies). Data as of June 30, 2013. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.
JULY 19, 2013 7

1163466 | 301674531
The S&P MidCap 400 Has More Than Double The Number Of Speculative-Grade Companies Of The S&P 500
The S&P MidCap 400 includes 106 speculative-grade companies (including financial and nonfinancial), more than double the 51 in the S&P 500. Overall, 62% of the companies in the S&P MidCap 400 Index are rated, and 140 are investment grade (see chart 6). In comparison, a higher portion of the S&P 500 is rated (88%), and it has a much higher number of investment-grade companies (390). Of the $1.4 trillion total market capitalization of companies within the S&P MidCap 400, companies that Standard & Poor's Ratings Services rates contribute 64% of the total market capitalization. Of rated companies, the 'BBB' rating category is the largest by market capitalization, and the market capitalization of these companies has increased by 20% to $483.6 billion (through June 28) (see chart 7). Market capitalization rose among all rating categories and the unrated category.
Chart 6
JULY 19, 2013 8

1163466 | 301674531
Chart 7
Since the beginning of the year, upgrades outnumbered downgrades for the index constituents. Standard & Poor's upgraded 21 companies in the index and downgraded six (see tables 2 and 3). The financial sector had the most upgrades, with seven, as several REITs were upgraded. The industrials and utilities sectors followed, with four upgrades each. The consumer discretionary and health care sectors had the most downgrades, with two each. Five companies became rising stars when they were upgraded to investment grade from speculative grade. Standard & Poor's upgraded one rising star, Kansas City Southern, on March 8 while the company was still an index constituent, but it was subsequently moved to the S&P 500 in the second quarter. There are no fallen angels, or companies downgraded to speculative grade from investment grade, from the index so far this year.
Table 2
S&P MidCap 400 Companies Downgraded In 2013

Date 6/27/2013 6/17/2013 5/16/2013 4/29/2013 4/29/2013 Company name Solera Holdings Inc. Endo Health Solutions Inc. Scientific Games Corp. Rent-A-Center Inc. Allscripts Healthcare Solutions Inc. Sector Information technology Health care Consumer discretionary Consumer discretionary Health care Rating to BBBBBBBB BB Rating from BB BB BB BB+ BB+
JULY 19, 2013 9

1163466 | 301674531
Table 2
S&P MidCap 400 Companies Downgraded In 2013 (cont.)

3/15/2013 Harsco Corp. Industrials BBBBBB Data and constituents as of June 30, 2013. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.
Table 3
S&P MidCap 400 Companies Upgraded In 2013

Date 6/28/2013 6/28/2013 6/19/2013 6/19/2013 6/10/2013 5/29/2013 5/21/2013 5/2/2013 5/2/2013 4/19/2013 4/5/2013 4/4/2013 4/2/2013 3/27/2013 3/21/2013 3/8/2013 2/28/2013 2/28/2013 2/26/2013 2/20/2013 1/11/2013 Company name Westinghouse Air Brake Technologies Corp.* Church & Dwight Co. Inc. Realty Income Corp. Olin Corp. Affiliated Managers Group Inc. Trinity Industries Inc.* HollyFrontier Corp.* OGE Energy Corp. Valmont Industries Inc. Federal Realty Investment Trust PNM Resources Inc. Hanesbrands Inc. Potlatch Corp. SUPERVALU Inc. Corrections Corp. of America Kansas City Southern Synovus Financial Corp. Equinix Inc. Camden Property Trust NV Energy Inc.* Alliant Energy Corp. Sector Industrials Consumer staples Financials Materials Financials Industrials Energy Utilities Industrials Financials Utilities Consumer discretionary Financials Consumer staples Financials Industrials Financials Information technology Financials Utilities Utilities Rating to BBBBBB+ BBB+ BB+ BBB BBBBBBABBB ABBB BB BB+ B+ BB+ BBBB+ BB BBB+ BBBARating from BB+ BBB BBB BB BBBBB+ BB+ BBB+ BBBBBB+ BBBBBBB B BB BB+ B BBBBB BB+ BBB+
*Rising stars. Kansas City Southern subsequently removed from the S&P MidCap 400. Data and constituents as of June 30, 2013. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.
Outlooks Have Improved For Rated Companies In The S&P MidCap 400
The positive bias--the percentage of companies that have a positive rating outlook or are on CreditWatch with positive implications and therefore have the greatest upgrade potential--increased to 11.4% from 6.9%. Meanwhile, the negative bias--the percentage of companies with a negative outlook or on CreditWatch with negative implications--decreased to 9.8% as of June 30, 2013, from 10.6% as of Sept. 30, 2012. For the overall population of rated companies in the U.S., the negative bias is higher at 13.3% and the positive bias is lower at 7.4%, as of June 30.
JULY 19, 2013 10

1163466 | 301674531
Table 4
S&P MidCap 400 Global Industry Classification Standard Sector Distribution

Number of companies 63 16 21 86 30 66 69 29 2 18 400 Investment-grade (no. of companies) 7 6 3 59 5 24 6 13 1 16 140 Speculative-grade (no. of companies) 23 5 12 6 11 18 20 10 1 0 106 Positive outlook or CreditWatch (% of rated) 6.7 9.1 0.0 9.2 0.0 19.0 11.5 8.7 50.0 31.3 11.4 Negative outlook or CreditWatch (% of rated) 6.7 9.1 26.7 10.8 0.0 9.5 7.7 13.0 50.0 0.0 9.8
Sector Consumer discretionary Consumer staples Energy Financials Health care Industrials Information technology Materials Telecommunication services Utilities Total
As of June 30, 2013. Source: S&P Capital IQ and Standard & Poor's Global Fixed Income Research.
By sector, telecommunication services has both the highest negative bias and the highest positive bias of the sectors--with 50% each (see table 4). However, there are only two telecommunications companies in the index. Telephone & Data Systems Inc. has a negative outlook while TW Telecom Inc. has a positive outlook. Aside from telecommunications, the energy sector shows the highest negative bias with 26.7%, and the utility sector has the highest positive bias of 31.3%. Standard & Poor's assigns a positive or negative rating outlook when it believes that an event or trend has at least a one-in-three likelihood of resulting in a rating action over the intermediate term for investment-grade entities (generally up to two years) and over the shorter term for speculative-grade entities (generally up to one year). Standard & Poor's places a rating on CreditWatch if there is at least a one-in-two likelihood of a rating change within 90 days. Potential fallen angels are companies that Standard & Poor's rates 'BBB-' and have either a negative rating outlook or are on CreditWatch negative. A one-notch downgrade would move them to speculative grade and likely lead to higher credit costs. There are currently five potential fallen angels in the index (see table 5). These are First Horizon National Corp., Big Lots Inc., Harsco Corp., Janus Capital Group Inc., and Telephone & Data Systems Inc. Potential rising stars are companies that are rated 'BB+' and have either a positive rating outlook or are on CreditWatch positive. A one-notch upgrade would move them to investment grade and likely lead to lower credit costs. There are currently two potential rising stars in the index, Lender Processing Services Inc. and Steel Dynamics Inc. (see table 6). Corporate funding costs rise considerably when moving down the ratings scale to speculative grade from investment grade. Because a broader mix of investors and institutions can buy and hold investment-grade bonds, companies rated 'BBB-' and higher typically borrow at lower rates than those rated 'BB+' and lower. For example, on June 28, the yield
JULY 19, 2013 11

1163466 | 301674531
on 'BBB' rated U.S. corporate bonds was 1.5% lower than those on 'BB' rated bonds. We used financial measures from S&P Capital IQ in the charts and tables in this report. Standard & Poor's Ratings Services makes adjustments to company-reported financials according to its criteria, and the adjusted measures may diverge from those S&P Capital IQ reports. We've included these adjusted figures from CreditStats Direct in charts 4 and 5 of this report. The S&P MidCap 400 is an index that measures the performance of midsize companies and is distinct from the S&P 500 (see us.spindices.com for details regarding the S&P MidCap 400 Index's construction).
Table 5
Potential Downgrades Of The S&P MidCap 400

Company name Smithfield Foods Inc. Cabot Corp. FirstMerit Corp. Ticker NYSE:SFD NYSE:CBT NasdaqGS:FMER Sector Consumer staples Materials Financials Financials Financials Financials Financials Industrials Financials Consumer discretionary Industrials Financials Telecommunication services Industrials Materials Materials Industrials Energy Information technology Consumer discretionary Energy Energy Energy Information technology Rating BB BBB+ BBB+ BBB+ BBB+ BBB+ BBB BBB BBBBBBBBBBBBBBBBB+ BB+ BB+ BB BBBBBBB+ B+ B+ B+ Outlook/CreditWatch CreditWatch negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative Negative
Old Republic International Corp. NYSE:ORI StanCorp Financial Group Inc. Trustmark Corp. Raymond James Financial Inc. The Brink's Co. First Horizon National Corp.* Big Lots Inc.* Harsco Corp.* Janus Capital Group Inc.* Telephone & Data Systems Inc.* FTI Consulting Inc. Greif Inc. The Scotts Miracle-Gro Co. R.R. Donnelley & Sons Co. Bill Barrett Corp. Rovi Corp. Scientific Games Corp. Alpha Natural Resources Inc. Arch Coal Inc. Forest Oil Corp. SunEdison Inc. NYSE:SFG NasdaqGS:TRMK NYSE:RJF NYSE:BCO NYSE:FHN NYSE:BIG NYSE:HSC NYSE:JNS NYSE:TDS NYSE:FCN NYSE:GEF NYSE:SMG NasdaqGS:RRD NYSE:BBG NasdaqGS:ROVI NasdaqGS:SGMS NYSE:ANR NYSE:ACI NYSE:FST NYSE:SUNE
*Potential fallen angel. Data, index constituents, and ratings as of June 30, 2013. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.
Table 6
Potential Upgrades Of The S&P MidCap 400

Company name NV Energy Inc. Ticker NYSE:NVE Sector Utilities Rating BBBOutlook/CreditWatch CreditWatch positive
JULY 19, 2013 12

1163466 | 301674531
Table 6
Potential Upgrades Of The S&P MidCap 400 (cont.)

Lender Processing Services Inc.* Ametek Inc. Broadridge Financial Solutions Inc. Cleco Corp. Great Plains Energy Inc. National Retail Properties Inc. Westar Energy Inc. Acuity Brands Inc. BancorpSouth Inc. BioMed Realty Trust Inc. Black Hills Corp. Equity One Inc. Rock-Tenn Co. Webster Financial Corp. Steel Dynamics Inc.* CoreLogic Inc. Oshkosh Corp. Alaska Air Group Inc. AMC Networks Inc. Ascena Retail Group Inc. Deluxe Corp. Terex Corp. TW Telecom Inc. Dean Foods Co. Synovus Financial Corp. United Rentals Inc. JetBlue Airways Corp. NYSE:LPS NYSE:AME NYSE:BR NYSE:CNL NYSE:GXP NYSE:NNN NYSE:WR NYSE:AYI NYSE:BXS NYSE:BMR NYSE:BKH NYSE:EQY NYSE:RKT NYSE:WBS NasdaqGS:STLD NYSE:CLGX NYSE:OSK NYSE:ALK NasdaqGS:AMCX NasdaqGS:ASNA NYSE:DLX NYSE:TEX NasdaqGS:TWTC NYSE:DF NYSE:SNV NYSE:URI NasdaqGS:JBLU Information technology Industrials Information technology Utilities Utilities Financials Utilities Industrials Financials Financials Utilities Financials Materials Financials Materials Information technology Industrials Industrials Consumer discretionary Consumer discretionary Industrials Industrials Telecommunication services Consumer staples Financials Industrials Industrials BB+ BBB BBB BBB BBB BBB BBB BBBBBBBBBBBBBBBBBBBBBBB+ BB BB BBBBBBBBBBBBB+ B+ B+ BCreditWatch positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive Positive
*Potential rising star. Data, index constituents, and ratings as of May 31, 2013. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.
JULY 19, 2013 13

1163466 | 301674531
Copyright 2013 by Standard & Poor's Financial Services LLC. All rights reserved. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
JULY 19, 2013 14

1163466 | 301674531

Untitled

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Untitled

Hochgeladen von

Copyright:

Verfügbare Formate

Credit Trends:

JULY 19, 2013 1

JULY 19, 2013 2

Debt, Earnings, And Cash Flow Have Grown Since 2011

JULY 19, 2013 3

JULY 19, 2013 4

JULY 19, 2013 5

JULY 19, 2013 6

Rating category AAA AA A BBB BB B and Below N.R. Total

Market capitalization 38.6 388.9 278.3 49.0 452.3 1,207.1

Total debt 15.0 142.1 113.6 55.3 56.6 382.5

EBITDA 4.9 47.0 33.4 9.1 34.1 128.4

JULY 19, 2013 7

JULY 19, 2013 8

S&P MidCap 400 Companies Downgraded In 2013

JULY 19, 2013 9

S&P MidCap 400 Companies Downgraded In 2013 (cont.)

S&P MidCap 400 Companies Upgraded In 2013

JULY 19, 2013 10

S&P MidCap 400 Global Industry Classification Standard Sector Distribution

JULY 19, 2013 11

Potential Downgrades Of The S&P MidCap 400

Potential Upgrades Of The S&P MidCap 400

JULY 19, 2013 12

Potential Upgrades Of The S&P MidCap 400 (cont.)

JULY 19, 2013 13

JULY 19, 2013 14

Das könnte Ihnen auch gefallen