- COVID-19 could knock US$211 billion from Asia-Pacific incomes and slow GDP growth to 4.0% in 2020.
- Our new baseline for China GDP growth in 2020 is 4.8% with a downside scenario of 2.8%. Australia, Hong Kong, Japan, Korea, Singapore, and Thailand will enter or flirt with recession.
- Risks remain on the downside and are non-linear for Asia's emerging markets that face healthcare constraints and tighter financial conditions.
The Macro View
Shaun Roache, Asia-Pacific Chief Economist, Singapore, (65) 6597-6137; email@example.com
Xu Han, New York, (1) 212-438-1491; firstname.lastname@example.org
We have downgraded our forecast for Asia-Pacific by 0.8 percentage points to 4.0% for this year--the slowest since 2009 and well below the average over the last decade of 6%. We anticipate a U-shaped recovery in the third quarter, with the region employing as many people and producing as much output as it would have done in the absence of the coronavirus by mid-2021.
Some activity will be lost forever. We estimate an income loss of about US$211 billion, which will blow a hole in balance sheets across the region. The economics of the shocks and public policy will determine how these costs are distributed. Risks remain on the downside (see "COVID-19 Now Threatens More Damage To Asia-Pacific," March 5, 2020).
The outlook has darkened for three reasons.
First, China's return to work is taking longer than we had anticipated, with a large economic cost. The small and midsize enterprises (SMEs) that employ most of China's workers are struggling to return to normal. We now expect growth during the first quarter to fall to 2%, year on year. This would leave full-year growth at 4.8% before rebounding to 6.6% next year.
The second reason is viral spread to other parts of Asia, and beyond. Now, Japan and Korea will be affected by the same supply and demand shocks that have hit China, including a loss of household confidence, avoidance of public spaces, and lower spending on discretionary goods and services. This will hit the service sector which accounts for over 70% of employment.
Weaker growth in the U.S. and Europe add to the drag, with downwardly revised hits this year of 0.3 percentage points and 0.5 percentage points, respectively.
The third reason is a tightening of financial conditions as investors require higher premiums on risky assets. This does not yet pose a substantial threat to regional financial stability due in part to central bank interventions.
However, emerging market exchange rate volatility and credit spreads have picked up. If sustained, economies that rely on capital inflows or have thin capital markets may have less space to adjust policies counter-cyclically by, for example, cutting rates and boosting public spending. This is especially true of emerging markets with current account deficits.
Heavily affected economies include Thailand, Hong Kong, and Singapore which have large exposure to trade and people flows (export receipts from travel and tourism account for over 11%, 10%, 5% of GDP, respectively).
Australia, Taiwan, and Vietnam will also see material hits to growth. India remains more insulated but faces its own domestic challenges.
One hard-to—quantify risk is that the virus is spreading undetected in some low and middle-income countries with limited testing capacity and weak healthcare infrastructure. If the virus spreads unimpeded in these economies, the shock to labor supply and confidence may be large.
While there continues to be high uncertainty about the rate of spread and timing of the peak of the COVID-19 disease, modeling by academics with expertise in epidemiology indicates a likely range for the peak of up to June 2020. For the purpose of assessing the economic and credit implications, we assume the global outbreak will subside during the second quarter 2020, consistent with our report, "Global Credit Conditions: COVID-19's Darkening Shadow," March 3, 2020. As the situation evolves, we will update our assumptions and estimates accordingly.
Funding Conditions Outlook
S&P Global Ratings expects Asia-Pacific financing conditions to be tightening, reflecting the reality of disrupted business as the outbreak continues to spread to more countries. Within the region, we see broadly accommodative policies to shore up regional economies. Looking globally, U.S. speculative-grade spreads widened over 20% in just five days (as of March 2, 2020) when risks surrounding COVID-19 began to weigh on investor sentiment.
U.S. investment-grade credit spreads stood at 171 basis points and speculative-grade credit spreads at 567 basis points (data as of Feb. 28, 2020). The last time we saw spread expansion of this magnitude was at the beginning of 2019 after President Trump (announced in December 2018) a plan for 10% tariffs on Chinese goods and an automatic rise to 25% should a trade agreement not be reached. Over 50 days, spreads would widen with investment-grade spreads at 190 basis points and speculative-spread at 571 basis points.
For bond issuance, Asia-Pacific kicked off 2020 with US$143 billion of issuance in January, the highest volume for that month in the past five years. February volumes are muted, however, at US$91 billion, due to the outbreak and the extended Lunar New Year holiday in China.
Asia-Pacific corporate bond issuance as of Feb. 29, 2020, was US$234 billion, slightly over last year's Asia-Pacific volume (see chart 2). Nevertheless, the refinancing pipeline appears reasonably healthy and will likely balance tempered new capital issuance growth in the region.
Financial Institutions: A US$100 Billion Problem
Harry Hu, CFA, Primary Credit Analyst, Hong Kong, (852) 2533-3571; email@example.com
Ming Tan, CFA, Primary Credit Analyst, Hong Kong, + 852 2532 8074; firstname.lastname@example.org
Fern Wang, CFA, Primary Credit Analyst, Hong Kong, (852) 2533-3536; email@example.com
Gavin J Gunning, Primary Credit Analyst, Melbourne, (61) 3-9631-2092; firstname.lastname@example.org
S&P Global Ratings expects the COVID-19 crisis to exert sharp, short-term pressure on Chinese banks. The figures speak for themselves.
We estimate that COVID-19 will result in US$100 billion in extra credit costs for Asia-Pacific banks in 2020, with Chinese institutions bearing the brunt. Using our revised estimate for Chinese 2020 GDP growth of 4.8%, we expect China's sector-wide commercial bank gross nonperforming loan* (NPL) ratio to peak at about 6.6%.
If this happens, the provision coverage could fall to 52% from 186% in the fourth quarter of 2019.
Assuming the banks fully provision for those new NPLs in the same accounting period, the increase in bad loans may shave about 400 basis points off the sector's core capital adequacy ratio of 10.9%.
We expect regulators to relax rules for banks' NPL recognition. Reported NPL ratios may moderately rise to around 2.2% for the Chinese commercial banks in 2020, up from 1.86% in the fourth quarter of 2019, with the remaining problem loans given special consideration.
This tracks regulators' greater tolerance for a slight increase in NPLs. Assuming provisions of 150% on reported new NPLs and 2% on loans given special consideration, coverage would fall only slightly to 182%, above the regulatory requirement of 120%-150% for the commercial banks.
This cover falls to 39% when accounting for other questionable loans. The accounting impact of "amortizing" the financial costs of questionable loans over several years should make this more manageable for the banks, reducing the sector's capital adequacy by about 45 basis points in 2020.
We estimate China's questionable loan ratio may peak at about 10.9%-11.9% in the aftermath of the epidemic.
The magnitude of the impact on the individual banks will vary by their exposure to geography, industries, and the volume of SME loans.
Banks' exposure to the Chinese provinces with the heaviest coronavirus outbreak tallies as follows: Hubei (3.5% of aggregate bank loans), Guangdong (11.2%), Henan (3.8%), Zhejiang (8.2%), and Hunan (2.8%).
The very small rural cooperative banks in Hubei province and other highly affected regions are pressured given severely curtailed business activities in those areas.
Among the bigger regional banks, the epidemic will likely hit Hankou Bank Co. Ltd., Wuhan Rural Commercial Bank Co. Ltd., and Hubei Bank Co. Ltd. the hardest (the three banks are all unrated). All three banks' loan books are predominantly (over 90%) exposed to Hubei, as of 2018.
Banks' exposure to central China represents about 13%-25% of their loan book as of end-2018. Among the mega banks, Postal Savings Bank of China Co. Ltd. has the highest exposure to the region, followed by China Construction Bank Corp. and Agricultural Bank of China Ltd.
Among the joint stock commercial banks (lenders with diverse shareholding), China Everbright Bank Co. Ltd. has the highest exposure, followed by China CITIC Bank Co. Ltd. and Industrial Bank Co. Ltd.
We believe the joint-stock banks are more prone to COVID-19-triggered weakness in the wholesale and retail trade sector. We are thinking particularly of Hua Xia Bank Co. Ltd., where wholesale and retail sector loans stood at 8.9% of the total loan book, and China Zheshang Bank Co. Ltd. (8.1%), and Industrial Bank (7.3%).
SMEs will be particularly hit by the government's drastic measures to contain the outbreak. At the individual bank level inclusive SME exposure varies notably. As of the first half of 2019, Postal Savings Bank's inclusive exposure was 13%, China Merchants Bank Co. Ltd. tallied at 9.8%, China Minsheng Banking Corp. Ltd. at 13.4%, and Zheshang Bank at 17%.
China's regulatory response so far has been to use the banking system to cushion the economic impact of the epidemic, and provide financing to entities crucial to medical support and containment of the virus. Banks may need to sacrifice near-term commercial interests, straining institutions already facing capital pressure.
*Defined as reported NPLs plus special mention loans and loans given special consideration before government support and write-offs.
Property: Sales Interruption Rattles Ratings
Christopher Yip, Primary Credit Analyst, Hong Kong, (852) 2533-3593; email@example.com
Matthew Chow, CFA, Primary Credit Analyst, Hong Kong, (852) 2532-8046; firstname.lastname@example.org
The outbreak will likely keep Chinese property transactions on hiatus for the coming weeks as sales centers remain shut or empty. Construction is also largely paused, likely pushing out delivery schedules and revenue recognition. This may lead leverage and profitability to deteriorate in the next one to two years, denting credit profiles in the sector. The longer this crisis lasts, the less recoverable this disruption will be.
In our baseline scenario, sales and operations ramp up by midyear, accelerating toward year-end. Under this scenario we believe that national sales performance will be similar to our industry forecast of 5%-10% decline against 2019.
Declining sales will hurt developers' liquidity as the proceeds still form the largest and most important funding source. Several companies already in the 'CCC' category, or with low ratings with negative outlooks, may face liquidity issues over the next several months. We believe the reason more developers are not yet affected mainly stems from their flexibility to defer land spending and--to a lesser extent--construction expenditure. This allows most to buy time. Record offshore issuances in January has also bolstered liquidity (see "China's Illiquid Developers Ask, How Long Will The Coronavirus Crisis Last?", Feb. 3, 2020).
In our baseline scenario almost one-quarter of China property sector ratings and outlooks may come under pressure, excluding ones already facing liquidity issues. In this scenario--which is that China property sales fully recover in June--we estimate 24% of ratings or outlooks may be at risk (see "New Virus, Unprecedented Risks For China's Developers," March 2, 2020).
Our projections factor in the odds that negative outlooks will tip into downgrades, or that positive outlooks fail to convert into upgrades. The remaining actions would involve companies with stable outlooks but with very thin rating buffers. Whether these ratings will be strained ultimately depend on their determination to control debt while drumming up sales.
The effects of retail rental concessions and negative rental reversions (or lower rents for new leases) offered by rated companies are mostly manageable under our stress scenarios. Most developers do not rely on rental income as a significant source of earnings.
However, for pure retail landlords, the pain is more direct. We expect footfall, tenant sales, rental reversion to drop drastically, especially for home-decoration mall operators with annual rental contract terms. However, the strain from rental reversions should be a temporary, playing out in a single year. The business model of such entities is light on expenditure that is typically well supported by cash flows. In our view, these landlords' leverage levels will normalize from 2021 onwards.
If the outbreak ends quickly, there may be upside for Chinese property firms, particularly given the potential for a sales rebound in the second half. The magnitude will greatly depend on potential policy supports. However, we expect companies will increase promotions and discounts to revive sales, and to incur costs related to delays and operational complexities. Our expectations for the projected profit slide only gets steeper as the crisis drags on.
|Asia-Pacific Property Companies Most Affected By Coronavirus Outbreak|
|Issuer||Rating||Major impact of coronavirus||What to watch|
|Jingrui Holdings Ltd.||B/Negative/--||Property pre-sales, a major source of liquidity, could decline signifcantly over the next few months.||Jingrui's recently issued US$180 million of notes for refinancing, partially alleviates its refinancing pressure. However, it continues to have US$400 million of notes due in April and a further US$150 million of notes due in July. The rest will need to be refinanced by internal resources such as cash offshore or remittance of cash onshore, or further issuances, which are subject to market conditions.|
|Yida China Holdings Ltd.||CC/Negative/--||Yida already has difficulty in refinancing its near-term debt given its high yield.||Yida has proposed to issue new notes to exchange for its outstanding notes due in April 2020, which we assess as distressed and tantamount to default. Following the conclusion of the exchange, we will reassess the company's financial and liquidity position, based on the amount of notes tendered.|
|Oceanwide Holdings Co. Ltd.||CCC/Watch Negative/--||As market sentiment turns negative, Oceanwide may find it more diffcult to execute further asset sale in the near-term. It also has significant salable resources in Wuhan, where transactions may be delayed.||Oceanwide has little available offshore liquidity. It will be important for the company to successfully complete its recently announced asset sale in the U.S. to meet bolster its liquidity for a US$280 million debt puttable in April.|
|Sunshine 100 China Holdings Ltd.||CCC+/Negative/--||The outbreak will put further pressure on Sunshine 100's already weak project execution, low operating efficiency, and weak liquidity.||Although the company does not have major onshore and offshore maturities due in March to June, it has a sizable maturity in the third quarter. The sustainability of its operations could be further tested during this distressed period.|
Technology: Nothing To Lose But Their Supply Chains
Raymond Hsu, CFA, Primary Credit Analyst, Taipei, (8862) 8722-5827; email@example.com
Clifford Kurz, CFA, Primary Credit Analyst, Hong Kong, (852) 2533-3534; Clifford.Kurz@spglobal.com
JunHong Park, Primary Credit Analyst, Hong Kong, (852) 2533-3538; firstname.lastname@example.org
Makiko Yoshimura, Primary Credit Analyst, Tokyo, (81) 3-4550-8368; email@example.com
The coronavirus outbreak has disrupted China's hardware supply chain. Transport restrictions and quarantine measures limited the flow of labor and materials to hardware companies, curtailing production even after most companies resumed operations the week of Feb. 10. Across Asia-Pacific, even for tech issuers with heavy exposure to China, S&P Global Ratings expects minimal deterioration in credit standing. However, the extent of the virus' impact will largely depend on the robustness of issuers' supply lines and the diversity of its end markets.
China sees the technology industry as critical to development and will likely support its tech champions. Hon Hai Precision Industry Co. Ltd., China's largest exporter, should benefit from such measures, along with standard bearers such as Semiconductor Manufacturing International Corp. (SMIC).
The first half of the year is typically a low season for the production of most information technology devices. Component manufacturers and electronic manufacturing service companies have capacity to ramp up production once COVID-19 dissipates.
Most of the technology companies within our rated universe have substantial leverage and liquidity buffers, and can withstand short-term revenue and cash flow shortfalls. Assuming our base case holds true and the outbreak stabilizes in China in March, and in other affected countries in June, we see little risk of rating downside for most of the Asia-Pacific technology issuers we review.
However, smaller entities or firms with limited rating buffer, such as Sharp Corp., may see rating pressure if the outbreak is not brought under control as quickly as expected.
For some of our rated Korean and Japanese technology issuers, their lower dependence on production facilities in China may mitigate the impact from COVID-19. Companies such as Samsung have built significant capacity outside of China, particularly in Southeast Asia, to diversify their production footprint over the past few years. We do not expect the recent spike in infection cases in Korea and Japan to have a material effect on the output of tech companies in the two countries, though the risk could rise dramatically if the outbreak is not contained quickly.
We believe electronic manufacturing service companies such as Hon Hai are most exposed to COVID-19 impact due to labor and logistical challenges during the outbreak. Such companies require a steady supply of components and raw materials--where loss of a single critical component can stop an assembly line--and often employ hundreds of thousands of assembly-line workers in a single factory complex.
While some of Hon Hai's facilities received approvals to restart on Feb. 10, 2020, we believe it is unlikely these operations will resume full production until at least the end of March, given the shortage in labor and protective gear.
Semiconductor companies such as SMIC, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), Samsung Electronics Co. Ltd., and SK Hynix Inc. may be less squeezed because their sophisticated semiconductor fabrication plants rely little on migrant workers from outside provinces, and they maintain high raw material inventory.
That said, we expect a revenue hit for TSMC, SK Hynix, Samsung, and Renesas Electronics Corp. given that more than 10% of their sales come from China. Semiconductors shipped to China for assembly for export may face production delays due to supply chain issues, while those semiconductors designated for products with end demand in China contend with supply chain issues and slowing consumptions. Smartphones sales in China, for example, are expected to drop during the first half of 2020.
SMIC may be more insulated because the company's limited production capacity falls short of normal demand from its domestic clients.
Sharp, could be more pressured if the outbreak persists longer than we expect, leading to a sustained decline in cash flow. Sharp's ratio of debt to EBITDA could deteriorate to above 5.5x, the level to sustain the current ratings, if revenue fell 10% annually.
|Asia-Pacific Tech Firms Most Affected By Coronavirus Outbreak|
|Issuer||Rating||Major impact of coronavirus||What to watch|
|Hon Hai Precision Industry Co. Ltd.||A-/Stable/--||Disruption in production due to a shortage in labor, components, and materials amid continued travel and transport restrictions.||How soon utilization in China can return to normal and the degree that overseas capacity can compensate underutilization in China.|
|Semiconductor Manufacturing International Corp.||BBB-/Stable/--||A potential decline in revenue and operating cash flow due to bottlenecks in China's tech supply chains, particularly those associated with assembly services.||How soon the tech supply chain in China can return to normal with labor and logistics challenges resolved and how much electronic manufacturing service companies can shift production using overseas capacity.|
|Taiwan Semiconductor Manufacturing Co. Ltd.||AA-/Stable/--||A potential decline in revenue and operating cash flow due to bottlenecks in China's tech supply chains, particularly those associated with assembly services.||How soon the tech supply chain in China can return to normal with labor and logistics challenges resolved and how much electronic manufacturing service companies can shift production using overseas capacity.|
|Samsung Electronics Co. Ltd.||AA-/Stable/A-1+||A potential decline in revenue and operating cash flow due to bottlenecks in China's tech supply chains, particularly those associated with assembly services.||How soon the tech supply chain in China can return to normal with labor and logistics challenges resolved and how much electronic manufacturing service companies can shift production using overseas capacity.|
|SK Hynix Inc.||BBB-/Stable/--|
|Renesas Electronics Corp.||BBB-/Negative/A-3||Lower auto production and sales in China with more exposure to the epicenter of the virus outbreak, Hubei province.||How quickly auto production and sales in China can recover after the outbreak stabilizes.|
Consumer: Discretionary Credits Take A Hit
Sophie Lin, Primary Credit Analyst, Hong Kong, (852) 2533-3544; firstname.lastname@example.org
Primary Credit Analyst: Ava Chang, Primary Credit Analyst, Hong Kong, (852) 2533-3530; email@example.com
Flora Chang, Primary Credit Analyst, Hong Kong, + 852 2533 3545; firstname.lastname@example.org
The coronavirus outbreak will delay consumption of consumer discretionary goods and services amid transport restrictions, contagion fears, and weak sentiment, while demand for consumer staples should remain steady. S&P Global Ratings expects most companies in the consumer products, retail, and leisure markets with material exposure to Chinese customers will likely see reduced operating cash flow for at least one quarter in 2020.
Macau gaming companies will be most affected by the epidemic, given the industry's reliance on Chinese tourists (70% of total visits) and its highly discretionary aspect. We expect visits to decline in the first and second quarters of 2020, with the first quarter seeing the most severe drop. China travel restrictions (including the suspension of the issuance of individual travel visas and group visas), contagion fears, and Macau's unprecedented suspension of casino operations for 15 days from Feb. 5, 2020, largely explain the fall.
These factors may see Macau gaming revenue fall by half in the first quarter. We believe it will take a few months for Macau visitor numbers to return, assuming the virus is well contained in March-April and travel restrictions are eased. We placed our ratings on three out of five rated casino companies with significant exposure to Macau (Melco Resorts (Macau) Ltd., Studio City Co. Ltd., and Wynn Resorts Ltd.) on CreditWatch with negative implications.
The outbreak will also depress offline retailers' sales and cash flows. We expect China's offline retail sales in the first quarter 2020 will decline compared with the same period last year, as traditional stores lose footfall. We have not changed our pre-virus forecast for annual online sales growth of 17%-22% in 2020 and 2021, in part because we expect some market share in retail sales will shift online.
We placed our rating on GOME Retail Holdings Ltd., an offline consumer electronic products retailer, on CreditWatch with negative implications, anticipating a potential sharp drop in revenue and profit.
Maoye International Holdings Ltd. (a department stores operator) and Xinjiang Guanghui Industry Investment (Group) Co. Ltd. (the largest auto retailer in China) will also likely see weaker sales and operating cash flow in the first quarter. If the outbreak lasts into the second half, COVID-19 may present refinancing risks for both retailers, given their significant short-term debt maturities. Both companies have good access to bank loans, which tempers this risk.
As the largest duty-free retailer in China, China National Travel Service Group Corp. Ltd. (CNTS) will experience significant decline in revenue and operating cash flow until the virus is contained and normal travel patterns resume. We don't believe that there is any fundamental change to the company's competitiveness. Additionally, we believe that CNTS has sufficient financial cushion to withstand the shock, given its strong bargaining power with suppliers and low debt leverage.
The outbreak has slowed consumer-product production and distribution with laborers only gradually returning to work, and disrupted logistics upsetting supply chains. Discretionary goods manufacturers with a weak balance sheet or imminent refinancing needs are most vulnerable. We lowered our rating on Shandong Sanxing Group Co. Ltd. by one notch, given its slow and uncertain progress with refinancing.
Demand for consumer staples, such as instant noodles and dairy products, should remain stable. This supports the stable rating outlook for most of our rated consumer staple manufacturers in the region.
|Asia-Pacific Consumer Companies Most Affected By Coronavirus Outbreak|
|Issuer||Rating||Major impact of coronavirus||What to watch|
|Studio City Co. Ltd.||BB-/Watch Neg/--||Drastic decline in Macau visitors and gaming revenue, despite the reopening of casinos.||Severity and longevity of virus' disruption to Macau visitor numbers and how quickly companies can reduce debt leverage once the epidemic is contained.|
|Melco Resorts (Macau) Ltd.||BB/Watch Neg/--||Drastic decline in Macau visitors and gaming revenue, despite the reopening of casinos.||Severity and longevity of virus' disruption to Macau visitor numbers and how quickly companies can reduce debt leverage once the epidemic is contained.|
|GOME Retail Holdings Ltd.||B+/Watch Neg/--||Significant decline in revenue and operating cash flow.||Effectiveness of cuts to operating expenses when revenue drops. Long-term competitiveness given the accelerating shift from offline to online retail.|
|Yihua Enterprise (Group) Co. Ltd.||CCC/Negative/--||Higher refinancing execution risk.||Execution of refinancing and cash collection from sales of property projects. Default is likely over the next six to 12 months.|
|Shandong Sanxing Group Co. Ltd.||B/Watch Neg/--||Slower progress on refinancing.||Refinancing progress and operating cash flow given uncertain economic and credit environment.|
|Xinjiang Guanghui Industry Investment (Group) Co. Ltd.||B/Negative/--||Weaker sales and operating cash flow amid diminished auto demand.||Access to credit markets and refinancing of significant debt due in 2020, including a US$300 million bond due in March 2020.|
|Maoye International Holdings Ltd.||B/Stable/--||Weaker operating cash flow amid reduced traffic and potential rental concessions to tenants.||Access to credit markets and new bank loans, as well as cash flows from property development.|
|361 Degrees International Ltd.||BB-/Negative/--||Pressure on revenue and likely slower working capital turnover, given rising channel inventories.||Order book for the second half of 2020 and the execution of US-dollar bond repurchase.|
|China National Travel Service Group Corp.||A-/Stable/--||Sharp decline of duty-free retail sales and travel services revenue.||Inbound and outbound tourism and the company's flexibility to delay capital investment.|
Autos: China Shutdown Reverberates Globally
Katsuyuki Nakai, Primary Credit Analyst, Tokyo, (81) 3-4550-8748; email@example.com
Claire Yuan, Primary Credit Analyst, Hong Kong, (852) 2533-3542; Claire.Yuan@spglobal.com
We believe COVID-19 will exact a heavy toll on the Chinese auto sector, the world's largest vehicle market, with sales of 25.7 million units in 2019. Demand will sink in the first quarter, with 80%-90% of Chinese car dealers still closed as of mid-February. S&P Global Ratings expects the near closure of the Chinese market will affect carmakers around the world, particularly those dependent on Chinese sales and supply lines.
Three-quarters of Chinese carmakers had restarted operations as of Feb. 21, 2020, but were running at a low rate. We believe many are grappling with missing components, disrupted logistics, and labor shortages.
Chinese plant closures have hit global supply chains. For example, Japanese carmakers depend on components from China, and Korean auto suppliers rely on Chinese production. As such, the coronavirus outbreak in China has hit Nissan Motor Co. Ltd.'s operations in Japan, and Hyundai Motor Co.'s Korean output.
In China, we see signs that local governments are easing procedures for companies to resume production. In Japan, the government has established a council to discuss remedies to get the carmaking and auto-parts industries back to normal.
Among key Asia-Pacific carmakers, we believe that Nissan's and Honda Motor Co. Ltd.'s earnings may be hit hardest, as China accounts for almost one-third of both companies' production and sales. In our view, Nissan will likely face higher rating pressure because it has yet to see the benefits of its structural reforms, nor from the rollout of new models.
The epidemic may less severely hit Toyota Motor Corp. Its geographically diverse business makes it less reliant on China.
We expect moderate rating pressure on Hyundai as our base-case assumption reflects very limited earnings contribution from China. Rating pressure on Hyundai could strengthen if prolonged supply chain issues severely damage its factory operation in Korea, or if the company is forced to financially support its joint venture in China. Likewise, Mitsubishi Motors (BB+/Stable/--) has moderate exposure to China, which generates around 10% of the firm's sales.
Among rated Chinese carmakers, we believe Dongfeng Motor Group Co. Ltd. is most affected by COVID-19. Half its capacity is in Hubei province where production should stay halted till March 10.
On this timeline we estimate Dongfeng Motor's production and sales volume in 2020 will be at least 5%-6% lower, year-on-year. We anticipate the operational disruption, and weaker-than-expected market demand, will drag the EBITDA margin of Dongfeng Motor Corp., the parent of Dongfeng Motor, on a proportionate consolidation basis to 7%-8% in 2020, versus our original forecast of 8.5%-9.5%.
We also expect Beijing Automotive Group Co. Ltd. and its core subsidiary BAIC Motor Corp. Ltd. will face elevated rating strain given the components shortage and production disruptions.
We see less margin and rating pressure for China FAW Group Co. Ltd., Zhejiang Geely Holding Group Co. Ltd., and Geely Automobile Holdings Ltd. These three companies have minimal exposure to Hubei and resumed operations at most plants on Feb. 10, 2020.
|Asia-Pacific Carmakers Most Affected By Coronavirus Outbreak|
|Issuer||Rating||2016 EBITDA margin (%)||2017 EBITDA margin (%)||2018 EBITDA margin (%)||2019 EBITDA margin (%)|
|Nissan Motor Co. Ltd.||BBB+/Negative/A-2||10||7.9||5.5||Below 5|
|Honda Motor Co. Ltd.||A/Stable/A-1||10.96||11.29||9.63||About 10|
|Dongfeng Motor Group||A/Negative/--||10.3||9.1||10.3||9.5-10.5*|
|Beijing Automotive Group||BBB+/Stable/--||9.6||11.4||11.6||9-11|
|Hyundai Motor Company||BBB+/Stable/--||8.29||6.45||4.9||5.7-6.2|
|*We forecast the EBITDA margin of Dongfeng's parent company (under proportionate consolidation) to be 8.5%-9.0% in 2019.|
Cyclical Transportation: Down, Not Out
Xin Hui Zu, CFA, Primary Analyst, Hong Kong, (852) 2533 3589; firstname.lastname@example.org
Andy Liu, CFA, Hong Kong, (852) 2533-3554; email@example.com
COVID-19-induced travel restrictions have grounded about half of the aircraft operated by airlines in greater China. We are seeing similarly radical downturns in the region's shipping sector while logistics and aircraft leasing sectors are less exposed. S&P Global Ratings expects most of its affected rated entities in Asia-Pacific have sufficient headroom to manage the fallout. However, rating headroom may be consumed quickly if the outbreak lasts much longer, or spreads more widely.
We expect government support will alleviate earnings pressure on the airlines. Such support includes waiving carriers' payments into the Civil Aviation Development Fund in China, and the rollout of sector assistance in Singapore. In addition, weak oil prices could also release some of the cost pressure.
We recently revised the outlook on our rated airline in the region, Virgin Australia Holdings Ltd., to negative from stable. Despite modest direct international exposure, the restrictions on inbound tourism from Chinese nationals will cut its domestic earnings because inbound tourists from China typically fly several domestic segments during their visit. In addition, Australia's prolonged bushfire season and softer economic conditions are contributing to a broader industry downturn. As a result, we anticipate adjusted debt to EBITDA may exceed 6x in fiscal 2020 (ending June 30, 2020).
Of our rated aircraft lessors in Asia-Pacific, CDB Aviation Lease Finance Designated Activity Co. has material exposure to Asia-Pacific with China alone accounting for over half its net book value. China accounts for about 30% of BOC Aviation Ltd.'s net book value.
Lessors are generally willing to defer rentals for a limited period if they believe an airline's business model is fundamentally viable. However, if travel declines sharply for more than a few months or if some airlines fail, that will pose significant second-order earnings impact on lessors.
The virus outbreak has delivered a demand shock to regional shipping companies, as China is the region's trading hub and the world's largest consumer of many commodities. Weaker shipping companies (especially dry bulk and container operators) will experience the most strain.
Our rated container shipping company, Wan Hai Lines Ltd., will likely incur a drop in volume of less than 10% in February, a traditional low season, mainly due to an outbreak-related slide in exports from China. Volumes may gradually pick up as factory production normalizes in China, but a potential widening of supply-chain disruptions as the virus spreads beyond China may complicate recovery.
Road transport segments in greater China are also hit hard by the outbreak. The two leading Chinese car rental companies, CAR Inc. and eHi Car Services Ltd., will likely see revenue drop by 5%-20% in the first quarter on reduced car rental demand, which will eat into their rating buffers. The biggest franchised public bus operator in Hong Kong, The Kowloon Motor Bus Co. (1933) Ltd., will likely see passenger volumes drop of 10%-30% in the first quarter given reduced local commuting and travel restrictions on inbound visitors; though we expect it has sufficient financial buffer to withstand the slump.
The epidemic will weigh on China's package express sector's first quarter performance, including S.F. Holding Co. Ltd., due to capacity constraints and transport restrictions. Nonetheless, S.F. should show resilience thanks to the fact the company owns and operates its logistics network, controlling the staff, delivery process, and service quality. In addition, the epidemic encourages online shopping, which is long-term positive for the courier sector.
Our rated postal services and logistic companies outside China in the region are negatively affected by the epidemic but are less exposed given their focus on domestic markets.
|Asia-Pacific Transport Companies Most Affected By Coronavirus Outbreak|
|Airlines||Virgin Australia Holdings Ltd.||B+/Negative/--||Modest direct international exposure, but restrictions on inbound tourism from Chinese nationals will cut Virgin Australia's domestic earnings. At this stage, the company anticipates the outbreak will reduce the airline's earnings by A$50 million to A$75 million.|
|Shipping||Wan Hai Lines Ltd.||BB+/Stable/--||64% revenue contribution from intra-Asia routes (2018).|
|MISC Bhd.||BBB+/Stable/--||Most revenue generated from Malaysia and the Americas. Being oil & gas focused, the company is less vulnerable to the outbreak than container peers but supply chain disruption could affect MISC’s petrochemical vessels. Its close ties with the parent Petroliam Nasional Bhd., which relies on MISC for liquefied petroleum gas transport, may help stabilize its earnings.|
|PT Buana Lintas Lautan Tbk.||B+/Stable/--||Indonesian business concentration with high dependence on single client, PT Pertamina, for chartering (mainly oil tankers). Domestic charter rates have remained relatively stable.|
|Road transport: Passenger buses||The Kowloon Motor Bus Co. (1933) Ltd.||A/Stable/--||100% Hong Kong. Likely to suffer a 10%-30% volume drop in first quarter and 10% drop for full year 2020. Sufficient rating buffer to withstand any temporary shock.|
|Road transport: Package delivery, logistics||S.F. Holding Co. Ltd.||A-/Negative/--||Significant exposure to China. Delivery volumes will be negatively affected in short run, but accelerated shift toward online consumption should be favorable to the company longer term.|
|IBC Capital Ltd.||B/Stable/--||High concentration to Asia (nearly 60%). Rubber segment could be impacted given depressed demand in the autos sector. However, the company has sufficient buffer to withstand temporary shock in 2020.|
|Transportation equipment: Aircraft leasing||Avation PLC||BB-/Stable/--||No exposure to China but has significant revenue concentration to Asia of around 74%. Main customers include Virgin Australia, Vietjet Air. Sufficient buffer to withstand any temporary shock in 2020.|
|BOC Aviation Ltd.||A-/Stable/--||53% exposure to Asia Pacific and 31% to China by net book value (as of first half 2019). Main customers include Air China Ltd. and EVA Air Corp.|
|CDB Aviation Lease Finance Designated Activity Co.||A/Stable/--||Over 60% exposure to Asia Pacific and 56% to China by net book value (2018). Top Clients include Hainan Airlines Co. Ltd., China Southern Airlines Co. Ltd., and Zhejiang Loong Airlines Co. Ltd.|
|Transportation equipment: Rental cars||CAR Inc.||B+/Stable/--||Concentration in China. Likely to suffer about 20% revenue decline in first quarter. Consumers substituting public transportation with rental car to buffer the impact.|
|eHi Car Services Ltd.||B+/Stable/--||Concentration in China. Likely to suffer a 5%-10% revenue decline in first quarter with chauffeur services to corporate clients to support better earnings stability. Consumers substituting public transport with rental car to buffer the impact.|
|Note: Rated transportation companies with limited impact include Brambles Ltd., Hyundai Glovis Co. Ltd., Australian Postal Corp., New Zealand Post Ltd., and Singapore Post Ltd. Source: S&P Global Ratings.|
Transportation Infrastructure: China And Hong Kong Take A Hit
Gloria Lu, CFA, FRM, Primary Credit Analyst, Hong Kong, (852) 2533-3596; firstname.lastname@example.org
Parvathy Iyer, Primary Credit Analyst, Melbourne, (61) 3-9631-2034; email@example.com
The COVID-19 epidemic is severely reducing the flow of people and cargo in China, denting the margins of the region's transport infrastructure sector. S&P Global Ratings expects substantial disruption to sector revenue in China in the first half of 2020.
We anticipate performance will recover in the second half, extending to a strong rebound in 2021. Following the gradual resumption of economic activity after an extended Lunar New Year, traffic is picking up in regions outside Hubei but should still be far below normal in the coming weeks.
China's nationwide moratorium on toll collection on all roads from Feb. 17, 2020 may stress the liquidity of some toll operators. The policy will likely remain in force until the end of June (see "Sudden Policy Change In China Hits Toll-Road Operators' Liquidity," Feb. 18, 2020).
In our view, Yuexiu Transport Infrastructure Ltd. could exhaust its thin rating headroom after a large acquisition in 2019 and significant revenue loss this year. (see "Yuexiu Transport Infrastructure Outlook Revised To Negative On Sharp Revenue Decline; 'BBB-' Rating Affirmed," Feb. 24, 2020).
China's toll road sector has incurred a growing yearly shortfall in the toll revenue needed to pay debt and operating expenses. By the end of 2018, all construction-related debt of the sector amounted to Chinese renminbi (RMB) 5.69 trillion (US$810 billion), of which over 80% were bank loans, primarily from state-owned commercial and policy banks.
We expect the banking regulator will ask lenders to delay toll road companies' payment of loan interest and principal in the first half. Gansu Provincial Highway Aviation Tourism Investment Group Co. Ltd. will likely manage its liquidity strain thanks to its habit of pre-funding capex and debt payments six months in advance (see "Gansu Highway 'BBB' Ratings Affirmed; Outlook Stable," Feb. 26, 2020).
The 14-day quarantine requirements on ships and vessels from China, disruptions to China's supply chain and manufacturing, and uncertainty in global trade and economy due to fast coronavirus spread outside China will adversely affect port throughput in 2020. We estimate that volume at Shanghai container port, the world's largest, will decrease 3%-5% in 2020. Chinese ports have also lowered some fees and charges to customers, which may moderate their margins.
The Hong Kong government has greatly reduced the flow of visitors from mainland China. Fear of contagion has also reduced the use of public transport. S&P Global Ratings estimates the Hong Kong GDP growth will contract another percentage point in 2020 (see "COVID-19 Now Threatens More Damage To Asia-Pacific," March 5, 2020).
As government-controlled entities, both Airport Authority Hong Kong (AAHK) and MTR Corp. Ltd. (MTRC) have cut rent to support tenants.
MTRC had a 50% drop in patronage in the first two weeks of February, and offered a 50% rent reduction for February and March to its small-to-medium tenants at its train stations and shopping malls (see "MTR Corp. Ltd.'s Stand-Alone Credit Profile Threatened As Ridership Tumbles," March 3, 2020).
Reduced traffic and cash flows and stubbornly high capital expenditure will reduce the financial headroom of AAHK and MTRC. (see "Airport Authority Hong Kong's Recovery Grounded By Coronavirus," Feb. 12, 2020).
Australia's airport sector is the most exposed to COVID-19-related fallout. Airports are seeing lower passenger numbers and we expect the trend will last for another three to six months. Based on our sensitivity analysis we do not expect any rating effect, so far, on any rated airports, which have sufficiently managed costs and capex to get them through this soft period.
Sovereigns: In Like A Lion, Out Like A Lamb
KimEng Tan, Primary Credit Analyst, Singapore, (65) 6239-6350; firstname.lastname@example.org
The coronavirus outbreak has exerted significant short-term pressures on China's economic and fiscal metrics. However, S&P Global Ratings believes a likely economic rebound later in the year will limit the sovereign-credit impact on China and other deeply affected regions, such as Korea, Singapore and Hong Kong.
With reported new cases of the disease dropping sharply in China, especially outside Hubei province, the policy focus is now on resuming normal economic activity. Progress has been slow, however, especially among smaller producers. Chinese officials may have to revise down their growth expectations for the year as a result.
But as the epidemic stabilizes in China, infections have shot up elsewhere, particularly in Korea, Iran, and Italy. If the spread of the disease widens significantly in other sizable and internationally connected economies, the economic costs may escalate. This may weigh on sovereign credit fundamentals in Asia-Pacific.
Recent developments have reduced expectations for Asia-Pacific economic growth. The slower growth of last year and exceptional events, such as the fires in Australia and social unrest in Hong Kong, had already dented regional finances. Korea, for instance, has announced a supplementary budget amounting to almost Korean won 12 trillion (US$9.8 billion). The Hong Kong and Singapore governments have also announced sizable budgetary measures to support businesses and residents, with the former expecting a deficit of nearly 5.5% of GDP in the next fiscal year (see "Hong Kong's Record Deficit Foreshadows Further Fiscal Weakening," Feb. 27, 2020).
We expect pressures on most sovereign ratings in the region to be mild and temporary. Growth in Asia-Pacific is still healthy by global standards. We don't expect the virus will inflict long-term economic damage, and the outbreak does not appear to have materially affected international financial flows.
Furthermore, some of the hardest-hit regions have a relatively robust rating buffer. Outside of China, our economists expect COVID-19 will weigh most heavily on the economies of Hong Kong, Singapore, Thailand, Korea, and Vietnam. The ratings on the governments of these regions rest on credit metrics that are strong compared with peers at the same rating levels.
Commodities: Risk Rises As COVID-19 Goes Global
Danny Huang, Primary Credit Analyst, Hong Kong, (852) 2532-8078; email@example.com
While the situation in China seems improving, COVID-19 is spreading widely to other countries. We see a rising risk the outbreak will dent global commodity demand. This was seen most starkly when oil prices tumbled on March 8 after OPEC and Russia failed to stick to their production-cut pact. The only exception is the price of gold, which has been rising as traders become risk-averse.
S&P Global Ratings believes the credit standing of China's larger state-owned commodity companies will be little affected given they are key producers with government backing and robust bank relationships. We see greater ratings risk for smaller, privately owned companies facing diminished operating cash flow. We question whether all these groups have sufficient liquidity to weather this crisis. If the weak oil price persists, we may see pressure for some regional names as well.
Within our publicly rated universe, Mongolian Mining Corp. and Guangyang Antai Holdings Ltd. are in the 'B' category with less than adequate liquidity. However, Mongolian Mining's bond is due only in 2022, and Guangyang Antai's borrowings are all in the form of bank loans.
Although most Chinese factories have resumed operations from Feb. 10, 2020, utilization rates have yet to return to normal. Those in Hubei province will not restart until March 11, at the earliest, with the possibility of further delays. Many workers are still in their home towns and have not reported for work.
Some governments and companies are offering cash incentives to lure back laborers. According to the National Energy Administration, 76.5% of China's coal mines had resumed operations as of Feb. 22, 2020. The two central government-owned coal companies are operating at 95% capacity.
Many Chinese factories restocked inventories before the Lunar New Year, as per usual practice, supporting China's commodities producers. For example, the production of China's major steel mills at end February was 3% above the level seen at mid-February. However, steel products inventory rose by 115% in end-February comparing with early 2020 according to the China Iron and Steel Industry Association.
The outbreak has also slowed construction work, though some infrastructure projects have resumed lately. Central and local governments have encouraged the restarting of industrial activities. We expect the government will increase infrastructure spending this year to boost the economy.
Commodity prices generally fell in late January and early February when COVID-19 was spreading fast in China (chart 3). Prices started falling again on Feb. 24, 2020, as the coronavirus started spreading to more countries.
Investor Q&A: Sector Impact Of Coronavirus
S&P Global Ratings did a webcast on Feb. 11, 2020, to update investors on the effects of the coronavirus on Asia Pacific credits. The following is an edited summary of the question and answer session:
What are the credit implications of the outbreak on banks and leasing companies? (Gavin Gunning, credit analyst)
The most immediate hit from the coronavirus outbreak will be for corporate and consumer sectors. Depending on the severity and the longevity of the coronavirus on these sectors, the credit standing of banks may be hit. And we note that to date, there have been no negative rating actions on banks, and there's no credit crunches or any negative rating outlooks. And while we don't expect any in the immediate short term, obviously we're keeping a very close eye on this.
We believe that systemically important banks in 14 of the 20 banking systems in Asia-Pacific are likely to be the beneficiaries of extraordinary government support. So if there's a negative rating action on an Asia-Pacific sovereign, there could be a negative rating action on banks.
How is the outbreak affecting commodity sectors? (Danny Huang, credit analyst)
Crude oil and iron ore prices have been falling since the outbreak. If we look at more details in terms of crude oil in China, jet fuel was about 17% of total oil consumption, and that will be most affected because of reduced flights, obviously. Gasoline, about 23%, will be also strained, but probably, people may prefer driving their own cars and taking public transport during this time. Diesel comprises another 30% of oil consumption, which is more related to industrial activities than transport. And for road transport, currently, what we understand is the major limitation is in interprovincial travel.
And in terms of iron ore, our understanding is most steel mills are actually still operating because it's very costly to shut down the black furnace and restart again. But of course, the downstream demand will be weak, especially for autos.
How has the Chinese property sector fared during this crisis? (Christopher Yip, credit analyst)
Sales activities are being effectively halted across China, the question is how how soon can they start to recover? It's not just in Hubei province or the city of Wuhan.
The longer the sales slump, the more dangerous we think it might be for weaker developers because a lot of them depend on the cash inflow to stay afloat. Some of them rely on asset disposals that were planned some months ago. And if they're expecting those to transact to shore up inflows to repay debt, we see obstacles to get those done in time.
The saving grace for the sector is the fact that they issued a historic amount of offshore debt in January and continued to do so in recent weeks--US$21.3 billion in offshore notes in the first two months.
What are the implications for the technology supply chain? (Clifford Kurz, credit analyst)
There's been an effect on the technology hardware supply chain given the extended Lunar New Year holiday and restrictions on labor movements.
The biggest impact will likely fall on the electronic manufacturing services, such as Hon Hai Precision Industry Co. Ltd., given their dependence on upstream tech hardware components and their high reliance on labor. Some of Hon Hai's factories are back in operation, but some have yet to receive approval to do so.
Some of the other companies in the tech supply chain such as Semiconductor Manufacturing International Corp. and Taiwan Semiconductor Manufacturing Co. Ltd. have reported that they are operating normally.
Internet companies such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd. are relative beneficiaries of the crisis. There's definitely going to be a fall in consumer discretionary spending that's going to hurt them. But as consumers stay at home, most people will probably be spending their time online. So we'll definitely see a benefit from that.
What is the impact on retail in China? (Sophie Lin, credit analyst)
We expect the coronavirus to depress retail sales in China until the fourth quarter 2020 at least, and probably longer.
Travel-associated retailers, mainly duty-free retailers, will likely to suffer the most, followed by traditional brick-and-mortar retailers. The strain on online retailers should be less material once the delivery and logistics capability gradually resume in China. We have not changed our pre-virus forecast of annual online sales growth for about 17% to 22% in 2020 yet.
This report does not constitute a rating action.
|Primary Credit Analysts:||Vera Chaplin, Melbourne (61) 3-9631-2058;|
|Christopher Lee, Hong Kong (852) 2533-3562;|
|Kiyoko Ohora, Tokyo (81) 3-4550-8704;|
|Terry E Chan, CFA, Melbourne (61) 3-9631-2174;|
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. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
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 acknowledgment 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 non-public 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 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.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: firstname.lastname@example.org.