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1、Global Credit Research12 July 2019THE GLOBAL CREDIT CYCLE: Now Your Fear It,Now You DontPeter AcciavattiUS HY Credit Research and Strategy (1-212) 270-9633peter.acciaJ.P. Morgan Securities LLCSaul DoctorEuropean HG Credit Strategy (44-20) 7134-1539saul.dJ.P. Morgan Securities plcDaniel LamyEuropean

2、HY Credit Strategy (44-20) 7134-0467danielJ.P. Morgan Securities plcYang-Myung Hong EM Corporate Strategy (1-212) 834-4274ymJ.P. Morgan Securities plcZafar Nazim CEEMEA Corporates (44-20) 7134-7551zafar.J.P. Morgan Securities plcNatalia CorfieldLatin America Corporates (1-212) 834-9150natalia.corJ.P

3、. Morgan Securities plcSoo Chong LimAsia ex Japan Corporates (852) 2800-7387soo.cJ.P. Morgan Securities Asia PacificHiroshi Uchino Japan Corporates (81-3) 6736-7663Hiroshi.x.uJ.P. Morgan Securities Japan CoSheila XieUS HG Credit Research and Strategy (1-212) 834-3036sheilJ.P. Morgan Securities LLCSe

4、e end pages for analyst certification and important disclosures, including investment banking relationships. J.P. Morgan does and seeks todo business with companies covered in its research reports. As a result, investors should be aware that the firm may have acould affect the objectivity of this re

5、port. Investors should consider this report as a single factor in making their investment decision.of interest thatStephen Dulake ACEric Beinstein ACGlobal Head of Credit ResearchUS HG Credit Research and Strategy (44-20) 7134-3550(1-212) 834-4211stephen.deric.beinJ.P. Morgan Securities plcJ.P. Morg

6、an Securities LLC获取报告1、2、3、每周群内7+报告；当日华尔街日报、4、行研报告均为公开利归原作者所有，起点财经仅分发做内部学习。扫一扫 关注公号回复：加入“起点财经”群。Executive SummarySince our last update 12 months ago, its fair to say that credit was all of a sudden a concern and then it wasnt! 4Q18 and very early 1Q19 were characterized by significant investor angst

7、, mostly in developed markets, around the quantum of BBB-rated corporate debt and potential value destruction in the event of a material economic downturn and wave of “Fallen Angels.” Then central banks pivoted and that was that, quite frankly.Interpreting the credit cycle “clock” remains a bit art,

8、 a bit science. In placing the various sub-segments of the global credit complex this year versus last, we have really focused on trends in leverage and underlying credit fundamentals and acknowledge that the year-on-year change in corporate balance sheets may not reflect precisely where we are in t

9、he cycle in a qualitative sense. By of example, lets consider Euro High Grade, which remains close to the Cycle Top year over year. Taken at face value, the optics of the clock would suggest balance sheets must necessarily deteriorate before they improve, i.e., a move from the Top to the Bottom. How

10、ever, this is at odds withobserved corporate behavior, which hase more conservative against the backdrop of slower Euro area growth.As we comment, stalled growth makes for a stalled credit cycle.Developed MarketEmerging Market Divergence. One of the striking features of this update is the divergence

11、 between Developed Markets and Emerging Markets. Emerging Market Corporates continue to see improving fundamentals, whereas they continue to corrode in Developed Markets. Emerging Market Corporates have really been hunkered down behaviorally since 2015-2016, reflecting a myriad of factors across dif

12、ferent jurisdictions and sectors (weaker commodity prices, political scandal, sanctions, etc.). Looking forward, we think were probably close to the peak in credit quality given the impact of things like trade and a number of stressed sovereign situations.High Grade versus High Yield. The ongoing co

13、rrosion of Developed Market fundamentals is very much a High Yield and Leveraged Loan story. While we dont expect a material rise in default rates, we do expect this to be reflected inpricing in an environment where growth is slowing and note the 2Q19 Yield.pression between High Grade and HighStephe

14、n DulakeEric Beinstein2Defining the quadrants of the credit cycle diagramStrong but weakening credit metrictrends: A market/sector has solid credit fundamentals, but they are trending weaker, either because of weaker business results or management decisions to increase leverage, engage in M&A, o

15、r take other actions that are negative for creditors. Closer to one oclock, fundamentals are very strong and there is little concern; at three oclock credit deterioration has been evident.Strong credit metrics, trending better: A market/sector has solid credit fundamentals that are continuing to imp

16、rove. For instance, their revenues might be increasing, or they might be reducing leverage or taking other actions in support of creditors.Weak credit metrics but on an improving trend: A market/sector has weak credit fundamentals, but they are improving thanks to a better operating environment or l

17、ess negative management trends. This could be because a company post M&A hasWeak credit metrics, which continue to trend down: A market/sector has weak credit fundamentals and they continue to weaken, either because of weaker business results or management decisions to increase leverage or engag

18、e in M&A or take other actions that are negative for creditors.begun tever, or the operatingenvironment has bottomed.Source: J.P. Morgan.3Agenda4The Credit Cycle in EM42The Credit Cycle in Japan39The Credit Cycle in Europe32The Credit Cycle in the US19Credit Metrics by Region9The Credit Cycle by

19、 Region5EM credit trends are improving while HY in both the US and Europe is deteriorating. In HG we see metrics stable 2018 2019EUR HGJapan, US HY,EUR HYUS HGEUR HGEM LatamEM AsiaJapanUS HGUS HY EUR HYEM AsiaUS, EURLev LoansEM CEEMAUS, EURLev LoansEM CEEMAEM LatamArrows show trend in credit cycle o

20、ver the past year. Green = improved, Red = weakened, sideways = unchanged5Source: J.P. Morgan.Where are we in the credit cycle globally?US High Grade: Leverage in US High Grade is at a new peak, but excluding recent M&A transactions it has been stable oya. This has been led by declining EBITDA g

21、rowth at a pace that is about equal to declining debt growth. On the positive side, some of the largest BBB issuers have a renewed focus on deleveraging and maintaining/improving their credit ratings, and the share of very highly levered HG companies has declined. More worryingly, HG issuer non-Fina

22、ncial EBITDA growth has been declining for six quarters, even as US GDP growth has been strong. With this trend likely to continue given JPMs economic views, it will be difficult for leverage metrics to improve meaningfully, even with corporate focus on this. If/when we enter a period of weaker econ

23、omic performance it is likely that the concerns about the large amount of BBB- debt will resurface again.nUS High Yield: Credit metrics for high yield companies eroded modestly during 1Q19 off their strongest base in six years. Revenue growth in 1Q (+2.4% y/y) was the weakest since 3Q16 with six sec

24、tors seeing a y/y contraction. Meanwhile, EBITDA contracted y/y for the first time since 3Q16 after growing 12.7% per Q in 2017/2018. Leverage, too, increased for the first timenin 11 quarters off a 6yr low (+0.1xto 4.08x vs. 4.57x in 2Q16 and 3.87x in 3Q12). That said we do not expect much of apick

25、up in default activity for the foreseeable future. Strong top- and bottom-line performance the past few years and a record pace of refinancing has balance sheets in a solid position. Default rates are forecasted to be 1.5% in 2019 and 2.0% in 2020.US Leveraged Loans: Given the overlap between compan

26、ies in the high yield Loan and Bond markets, most characteristics for the two markets are similar. Combining the aforementioned, we believe default rates will remain below 2% for the next two years. That said, the leveraged loan market is further ahead in the credit cycle compared to the high yield

27、market. Demand from retail loan mutual funds, CLOs, and SMAs continues to drive more and more borrower-friendly terms, which in turn has allowed loan new issue characteristics to turn modestly more aggressive.nEuropean High Grade: Euro Area growth has continued to downshift this year, with our econo

28、mists recently revising down their FY19 GDP growth forecast by 0.2% to 1.2% oya. However, the impact of this on credit fundamentals has been hard tongauge due to the introduction of IFRS 16, which we believe caused net leverage to rise by 0.3xin 1Q19. In our view,however, the pass-through from slowe

29、r growth has been fairly limited so far, with revenues growing by +6.0% YoY in 1Q19.Additionally, corporate behavior hase more conservative as business sentiment has deteriorated, with M&A volumesfalling to a two-year low of 120bn in 2Q19. Falling sovereign yields are also a boon, with interest

30、coverage ratios remaining near all-time highs at 13x. Overall, we think that the credit cycle has continued to stall.6Source: J.P. Morgan.Where are we in the credit cycle globally?European High Yield: European high yield issuers continue to see a slow deterioration in credit fundamentals as regional

31、 growth has stalled. Our most recent snapshot of issuer leverage is at 4.2x, the upper end of the range from the past seven years. Additionally, we are now seeing net downgrades on average, with a steep rise in idiosyncratic risk. On the positive side, however, interest coverage ratios remain health

32、y, and more cautious issuer behaviour has caused our estimate of “credit negative” supply to fall to a historical low of just 12% of total issuance.nEuropean Leveraged Loans: Leveraged loans are the most advanced segment of European credit markets as far as the cycle is concerned, we believe. First-

33、lien leverage is now higher than levels seen just ahead of the financial crisis, and covenants and documentation looser still.nJapan Credit: After having posted record high profits in three consecutive years, Japan corporate earnings are peaking out. Given limited domestic growth potential due to an

34、 aging and declining population, Japan corporates continue to look for growth opportunities outside the archipelago and are expected to increase leveraging activities. As a flip side of an export-driven- economy, most of the corporates centered on exporters are continuously vulnerable to external fa

35、ctors such as global economies, trade friction, and geopolitics.nEmerging Markets: Most of the EM regions have moved further along the credit cycle but are still in the improving phase or close to the peak. We believe additional improvement in credit metrics is likely to be limited given the more un

36、certain macro outlook, but we expect better resilience against a downturn as issuers have been conservative with very little M&A or shareholder-friendly activities. The focus has been more on balance sheet management and reducing debt, thereby supporting the decline in leverage ratios despite sl

37、ower growth. Financials have remained broadly stable across the regions, and operating performance has held up even in countries that have been facing elevated macro volatility. The main risks to EM corporate fundamentals stem from select sovereign situations and the negative effects from economic s

38、lowdown that could also lead to a deterioration in funding conditions. That said, we do not expect meaningful contagion to corporates outside of the countries in question, which would keep the overall fundamental trend from weakening rapidly.n7Source: J.P. Morgan.Agenda8The Credit Cycle in EM42The C

39、redit Cycle in Japan39The Credit Cycle in Europe32The Credit Cycle in the US19Credit Metrics by Region9The Credit Cycle by Region5Leverage: Most credit markets had relatively unchanged leverage except for the EM High Yield credit marketNet Leverage2008-2018 Range2018 Net Leverage2017 Net LeverageNet

40、 Leverage2008 - 2018Min1.3xY/Y Change0.2xCredit MarketsUS HG20182.4x20172.2xMax2.4xEUR HG3.2x3.0x2.6x3.3x0.2xEM HG1.3x1.4x0.9x1.5x-0.1xJapan3.7x3.4x3.2x5.2x0.3xUS HY3.5x3.6x3.0x4.2x-0.1xEUR HY3.8x3.6x3.5x5.4x0.2xEM HY2.4x2.9x1.2x3.2x-0.5x0.751.752.753.754.755.75US HG: Net leverage has risen to a new

41、 peak with and without the commodities-related sectors. Increasing leverage has been driven by M&A and a slowing pace of EBITDA growth. More positively, the largest BBB issuers are showing an increased focus on their balance sheets and deleveraging.EUR HG: Net leverage rose by 0.2x to 3.2x over

42、2018, driven by a 5.2% YoY increase in net debt. Primarily, this was due to heavy acquisition volumes last year, although the M&A pipeline has slowed in 2Q19.Japan: Leverage increased by 0.3x led by, EPCO, and real estate. Also, a hike in M&A activities accelerated the trend.US HY: Net lever

43、age for HY companies decreased to 3.54x in 4Q18 (3.71 compared to a high of 3.90x in 3Q16.modities), down from 3.56x the previous quarter andEUR HY: Leverage rose by 0.2x to 3.8x in 2017, driven both by a 4.1% YoY rise in net debt and a 1.1% YoY fall in EBITDA.EM HG and HY: Net leverage in 2018 decl

44、ined by 0.1x to 1.3x for IG and -0.5x to 2.4x for HY, driven by double-digit top-line growth and decline in debt. Exporters further benefitted from FX depreciation across EM. Deleveraging was evident across all regions but most pronounced in EM Europe (-0.7x to 1.1x) and Latin America (-0.3x to 1.6x

45、).Source: J.P. Morgan.9Tail risk has declined or remained steady for most marketsUS HGEUR HGEM HGJapan* 36%37%40%35%33%32%32%29%29%29%28%27%30%26%26%25%24%23%24%22%22%21%20%19%20%15%13%10%0%201320142015201620172018US HYEM HY26%30%25%20%15%10%5%0%26%24%23%23%23%22%17%17%13%13%11%201320142015201620172

46、018*Japan excludes Utility (EPCOs) and Trading House, which are highly levered by natureSource: J.P. Morgan.10High Yield - percentage of debt with leverage over 7xHigh Grade - percentage of debt with leverage over 4xDebt Growth: EUR HG and HY saw a pickup in debt growth. This has slowed meaningfully

47、 in the US and EM credit marketsDebt Y/Y Growth-12.5%-2.5%7.5%17.5%27.5%37.5%US HG: Debt growth has slowed recently and only grew 3.0% y/y, which is the slowest annual rate of growth in USD HG debt in the last 13 years. The rate of debt growth has declined steadily since the peak of 14.1% in 3Q16.EU

48、R HG: Total debt rose by 5.9% over 2018, with the Bayer/Monsanto acquisition contributing roughly a third of the increase.EM HG: Gross debt was relatively flat y/y in 2018, while net was down 4% as issuers remained conservative with their balance sheets, continuing focus on liability management. Deb

49、t levels were up modestly in Asia IG (+3%) and Middle East & Africa (+2%), mostly in oil & gas, TMT, and utilities segments, but down -10% and -4% in EM Europe and Latin America. Asia real estate, while not in aggregate figures, also had a material pickup in gross debt, which was used to fin

50、ance growth.Japan: Recent hike in debt growth is mainly driven by non-manufacturers such as real estate, are still cautious on re-leveraging., and EPCOs, while manufacturers in generalUS HY: Debt growth averaged 3.0% in 2018 vs. average of 9.0% between 2012 and 2017.EUR HY: Debt increased by 2.4% ov

51、er 2018. While modest, this was the fastest pace of growth since 2015.EM HY: Gross debt declined by -11%, driven by commodity segments. Improved cash flow generation, focus on paring down debt vsetsales/tenders/buybacks, and still modest issuance outside of China contributed to the reduction in over

52、all debt levels. Similar to EM HG, Asia real estate sector recorded an increase in debt levels for HY as well.11Source: J.P. Morgan.Credit MarketsDebt Y/Y Growth2009 - 201820182017MinMax2009-2018 Range2018 Debt Y/Y Growth 2017 Debt Y/Y GrowthY/Y ChangeUS HG3.0%6.9%-1.4%14.1%-4%EUR HG5.9%-4.6%-4.7%9.

53、0%11%EM HG1.3%10.8%-0.7%18.2%-9%Japan8.3%6.0%-5.5%8.5%2%US HY3.5%4.3%-2.1%14.9%-1%EUR HY2.4%-6.2%-9.2%9.2%9%EM HY-3.9%7.0%-3.9%27.8%-11%Interest Coverage: Improvement across most markets to the higher end of its 10yr rangeInterest Coverage2.2x4.2x6.2x8.2x10.2x12.2x14.2x16.2xUS HG: Interest coverage

54、was flat y/y and in the low end of its 10yr range. However, it is difficult to be concerned when the metric is above 10x for the overall market. Interest expense increased 5% y/y, which was the slowest growth since 4Q17.EUR HG: Interest coverage ratios rose to a record high of 12.9x in 2018 as older

55、 high coupon bonds were refinanced at current extremely low yields.Japan: Thanks to prolonged ultra low interest rate environments, Japan corporate continued to enjoy high level of interest coverage.US HY: Coverage rose to a three-year high at 4.8x. The historical coverage range is narrow.EUR HY: In

56、terest coverage fell modestly over the year from 6.2x to 6.1x, driven by rising debt levels and a 1.1% YoY decline in EBITDA.EM HG and HY: Interest coverage improved to the best levels since 2011 given robust profitability and lower interest burden. For EM HG, interest coverage stood at 10.6x at YE2018, up 1.4x y/y, while for EM HY it w