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Industry roundup: 9 July 2020

US corporate ratings trend down amid pandemic but positive outliers exist

Corporate ratings in the US and Canada have been on a negative trajectory since the coronavirus outbreak was declared a pandemic in March but a few issuers are bucking the trend, according to Fitch Ratings. Broad upward rating movement is not anticipated, given the significant number of Fitch-rated issuers currently with a Negative Rating Outlook or Rating Watch Negative (RWN) and given the full impact of the outbreak remains unknown. Positive rating actions were due to idiosyncratic reasons, including corporate actions or reduced refinancing risk, as downgrades outpaced upgrades by nearly 10 times, with more than 160 downgrades across North America as of 19 June.

The majority of the positive rating actions since March occurred in the less economically sensitive telecommunications, healthcare and utilities sectors. These sectors represented nearly two-thirds of the 17 upgrades and close to half of the 15 issuers that had their Outlooks revised to Positive. There were isolated cases of positive rating actions in other sectors also, some of which have high exposure to the pandemic due to its effect on demand.

For example, within energy, the Rating Outlook for EQT (BB/Positive), which was adversely affected by the then bearish natural gas price outlook, was revised to Positive from Negative due to several developments over the last few months. EQT successfully refinanced some debt maturities with a convertible bond issuance, sold a modest amount of non-strategic assets, and is benefitting from improving natural gas fundamentals.

Reduced refinancing risk, as capital markets became more accommodating, was a trigger for many of the positive rating actions, particularly for non-investment-grade issuers. However, favourable secular demand trends and/or the stability of financial performance, despite the economic fallout from the coronavirus, drove upgrades and/or outlook revisions on many investment-grade issuers including Nvidia, American Tower and Crown Castle.

The bulk, or roughly 75%, of upgrades since March involved high-grade issuers but, with respect to both upgrades and Outlook revisions, positive rating actions have been split fairly evenly between investment-grade and non-investment grade issuers. Some of these actions involved rising stars that crossed over into investment-grade territory, with WPX Energy being a standout as it was a multi-notch upgrade for a company operating in a sector facing significant headwinds.


Numerix AI solution targets US$200 trillion financial contracts affected by LIBOR transition

Numerix has partnered with NextGen Strategic Advisors to introduce Numerix Oneview for the LIBOR Transition, a technology designed to address the most burdensome legal, operational, technological and risk challenges presented by the phase-out of LIBOR.

Using artificial intelligence (AI), the solution identifies, revises and extracts specific legal and transaction terms in loans, structured transactions, floating rate notes, and derivative contracts to:

  • Support contract language renegotiations.
  • Provide critical information to support operations and transaction management.
  • Provide custom data feeds to update downstream processing and valuation systems.
  • Provide risk management and scenario analyses.

By digitising contract information to automate the updating of systems with new rates and terms, Oneview for the LIBOR Transition can help legal and operations departments to significantly reduce the burden, resource demands, and time needed to drive their LIBOR transition projects. The contract information can also be fed into Numerix’s valuation models to calculate LIBOR exposures and risks under different scenarios utilising a range of benchmark assumptions. 

The solution provides revised contracts that use the recommended language from jurisdictional working groups or firm-specific proprietary language. Critical information is extracted from the contracts and can be used to feed transaction processing systems to update the terms of the transactions. Oneview for the LIBOR Transition can also be used to perform detailed valuation, risk and scenario analyses to support the risk management of the transition. 


AFP partners with Matrix Institute of Professionals on qualifications for Myanmar-based financial professionals 

The Association for Financial Professionals (AFP) and Matrix Institute of Professionals have announced a formal partnership to offer exam preparation courses for treasury and finance professionals based in Myanmar. The courses will equip financial professionals with the tools they need to earn the Certified Corporate Financial Planning and Analysis (FP&A) Professional and the Certified Treasury Professional (CTP) certifications.

The FP&A credential, sponsored by AFP, establishes a set of core competencies for the corporate financial planning and analysis profession and addresses areas that are not necessarily covered by a traditional degree. The AFP says that certified FP&A professionals are equipped to mitigate uncertainty and see beyond the numbers; they strive to make the numbers work to determine holistic strategic planning, budgeting, and forecasting that ties into the goals of the business.

The CTP credential, also sponsored by AFP, signifies that treasury practitioners have demonstrated the knowledge and skills required to effectively execute critical functions related to corporate liquidity, capital and risk management.

By partnering together, AFP and Matrix Institute of Professionals are providing finance and treasury professionals in Myanmar with a new path to earn each of these designations. Each student will have access to the preparation programme, plus a blended learning course taught by Matrix Institute’s local instructors.

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