Moody’s Talks – Behind the Bonds

The outlook for the global real estate market remains negative with the bumpy economy, tight financing conditions and the surge in remote work. In the US, we expect rental income growth for offices to remain poor overall and apartment income growth to moderate this year with supply up, mostly in parts of the Sunbelt. Globally, Japan is a bright spot with supply-demand dynamics in the commercial market relatively stable. In Europe, the commercial market remains at risk of further deterioration, but the UK is likely to recover quicker as asset prices have fallen at a faster pace. Guests: Lori Marks, Vice President - Senior Credit Officer, Global Corporate Finance Group and Ana Luz Silva, Vice President - Senior Analyst, Global Corporate Finance Group Host: Tania Hall, Senior Vice President - Senior Research Writer, Moody’s Ratings To read more on this topic, visit Moodys.com (Some content available only to registered users or subscribers.): Related Research: Real Estate – Global: Outlook remains negative as high funding costs persist and the economy slowsReal Estate – US: CRE fortunes vary by lender and property type, with office facing multiple risksHousing and Housing Finance – US: Homeowners with low rates stay put, keeping housing in a holding patternReal Estate – Europe: Credit quality still at risk despite improving sentiment; greater divergence likelyCommercial Real Estate – UK: Recovery set for second half of 2024, but pockets of distress will persist

In our opening segment, we discuss the slight slowdown in global market share growth for battery electric vehicles (BEVs) as some incentives to buy have ended, yet prices remain high. A scarcity of charging stations in Europe and the US also remains a deterrent for consumers. Our second segment, which starts at 9:40, focuses on the charging shortage and who will pay for expansion. Guests: Matthias Heck, Vice President - Senior Credit Officer, Global Corporate Finance Group and Rene Lipsch, Vice President - Senior Credit Officer, Global Corporate Finance Group Host: Jeff Pruzan, Vice President – Senior Research Writer, Moody’s Ratings To read more on this topic, visit Moodys.com. (Some content available only to registered users or subscribers.) Related Research: Auto Manufacturing – Global: Vehicle volume growth to be muted after last year’s strong finishAutomotive Manufacturing – EU & US: Charging network build-out must speed up to support EU, US automakers’ EV plansAutomotive Manufacturing – Global: Compliance risks in emission and safety regulations are becoming more evidentFuel Retailers – Global: Electrification will erode market dominance, investment to curb cash flow

Artificial Intelligence or AI is predicted to have a profound impact on many areas of business. In this episode of Behind the Bonds we assess where AI innovation is already showing significant potential. Which industries can expect to see improved productivity and what are the potential timelines for any positive impact on credit quality? We also discuss the disruptive potential of these new technologies and the risks to jobs. Later in the episode our colleagues look in more depth at the media, where AI’s potential is presenting opportunities and generating both opposition and collaboration from content creators. Guests: Francesco Bozzano, Vice President – Senior Analyst, Global Corporate Finance Group and Agustin Alberti, Vice President – Senior Analyst, Global Corporate Finance Group. Host: Tania Hall, Senior Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit Moodys.com. (Some content available only to registered users or subscribers.) Related Research: Nonfinancial corporates – Global: Market leaders in data-rich sectors will gain most from AI advancesDigital Transformation – Global: 2024 AI Outlook – Swift progress likely but rapid roll-out will bring risksMedia & Publishing – Cross Region: GenAI should benefit media companies, mainly by boosting productivity

In 2024 we see an uneven picture for companies across the globe. For those in North America and Asia-Pacific, excluding China, the credit outlook is stable. But in Europe, the Middle East and Africa, and Latin America the outlook is negative. Driving this testing global environment are higher for longer interest rates which are raising the cost of borrowing and re-financing. This is a particular challenge for speculative-grade companies. Higher rates are also weighing on consumer demand in some sectors, particularly real estate. Later in the episode at 11.30mins, our colleagues in Hong Kong take a closer look at prospects for companies in China, in recent decades the driver of the global economy, but facing a negative credit outlook for 2024. Guests: Myriam Durand, Managing Director, Global Corporate Finance Group and Gloria Tsuen, Vice President, Senior Credit Officer, Global Corporate Finance Group. Host: Jeff Pruzan, Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit Moodys.com. (Some content available only to registered users or subscribers.) Links: Global Outlook Segment Nonfinancial Companies – North America: 2024 Outlook - Stable on relatively robust growth, even as high rates drive riskNonfinancial Companies – APAC ex China: 2024 Outlook - Stable on sustained growth in large, domestic-focused economiesNonfinancial Companies – EMEA: 2024 Outlook - Negative as higher rates bite and consumers remain cautiousNonfinancial Companies – Latin America & Caribbean: 2024 Outlook - Negative amid high rates, slow growth and subdued commodity pricesChina Segment Nonfinancial Companies – China: 2024 Outlook - Negative amid lower growth and prolonged property downturnCross Sector – China: China will be more selective in providing support to state-owned enterpriseCross Sector – China: Slowing growth intensifies spillover effects of long property market downturnMacroeconomics– China: Medium-term growth outlook will reflect effectiveness of economic rebalancingCredit Conditions – China: Soft economic recovery heightens contingent liabilities from LGFV debt risks

This year has been a very weak one for leveraged finance deals as aggressive global monetary tightening hit markets. In this episode we explain why we see a gradual improvement in 2024, with refinancings driving new issuance in the US and EMEA. Guests: Chris Padgett, Associate Managing Director of North America Leveraged Finance Research and Jeanine Arnold, Senior Vice President of Leveraged Finance, EMEA. Host: Tania Hall, Senior Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit Moodys.com. (Some content available only to registered users or subscribers.) Related Links: 2024 Outlook – Growing refinancing needs, higher-quality LBOs, will drive new issuance

Retailers in North America and Europe are looking forward to another bustling holiday shopping season—but consumers may not be as eager this year as stores have hoped amid fairly high inflation, even with a strong labor market. Will 2024 get any better for retailers and makers of apparel? Later we look at the global transport sector—where container shipping continues to struggle, even while other modes of transportation look for improved earnings in 2024. Guests: Christina Boni, Senior Vice President; Mickey Chadha, Vice President-Senior Credit Officer; and Daniel Harlid, Vice President-Senior Credit Officer, all from the Corporate Finance Group of Moody’s Investors Service. Host: Tania Hall, Senior Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit Moodys.com. (Some content available only to registered users or subscribers.) Related Research: Retail & Apparel – Global: Recovery delayed to 2024 as inflation fatigue hurts spending; outlook still stableRetail & Apparel – Global: Outlook is stable as profits set to recover from lower costs and inventory realignmentRetail – US: Stronger than expected September retail sales pushes Q3 higher, but year to date spending remains mutedRetail & Apparel – EMEA: Quarterly Update: Trading conditions remain difficult despite some retailers' positive resultsTransportation – Global: Outlook stable despite weakening business conditions for container shippingShipping – Global: Tougher Panama Canal drought restrictions will have mixed credit effects for shippingMacroeconomics – US: US GDP revisions confirm economic resilience, but consumer spending momentum dipped in Q3

Private credit lenders built stores of capital that we expect will be put to work competing with banks to fund a new wave of leveraged buyouts. In the first segment of this episode, we discuss LBO competition and the risks it poses. Later, our guest lays out the concentration of private credit among a handful of giant asset managers building their own, largely self-contained lending ecosystems. Guests: Christina Padgett, Associate Managing Director and Sandra Veseli, Managing Director, both from Moody’s Investors Service’s Corporate Finance Group; and Rory Callagy, Associate Managing Director, with Moody’s Financial Institutions Group. Host: Jeff Pruzan, Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit Moodys.com. (Some content available only to registered users or subscribers.) Links: Private Credit – Global: Syndicated and private lenders will spar as LBOs revive, upping systemic risk

Big technology companies have been on a wild ride over the past few years, with the pandemic-driven boom followed by an inevitable hangover as economic uncertainty loomed. In the first segment of this episode, we examine the outlook for the global diversified information technology sector over the next 12-18 months. Then at 10.02 we discuss how the European Chips Act will help the region’s semiconductor manufacturers in the face of stiff competition from other parts of the world. Guests: Raj Joshi Senior Vice President and Dirk Goedde Vice President-Senior Analyst - Corporate Finance Group, Moody’s Investors Service. Host: Tania Hall Senior Vice President – Corporate Finance Group, Moody’s Investors Service. To read more on this topic, visit The Big Picture page on Moodys.com (some content only available to registered users or subscribers).

Airlines and airports are benefitting from booming demand from leisure travellers as people take to the skies for a well-deserved summer holiday. In the first segment of this episode, we look at what’s driving strong passenger traffic volumes at US and European airports and what operational challenges lie ahead. And then we explore the tailwinds keeping our outlook for the global airline industry positive for the next 12-18 months. Guests: Earl Heffintrayer, Vice President and Joanna Fic, Senior Vice President, both from Moody’s Investors Service’s Public Project and Infrastructure Finance Group; and Jonathan Root, Senior Vice President, Corporate Finance Group. Host: Jeff Pruzan, Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit Moodys.com. (Some content available only to registered users or subscribers.) Airports – US: Pandemic-driven traffic gains will hold in areas with population growth and tourismAirports – Europe: Passenger volumes will continue to rise this summer, but regional differences persistAirlines – Global: Outlook still positive as passenger demand extends recovery amid capacity constraints

Moody’s analysts discuss the economic and credit outlook for China, including the role of local government financing vehicles (LGFVs) and their debt burdens, and the latest on the property sector. Speakers: Lillian Li, VP-Senior Credit Officer, Moody’s Investors Service; Jessie Tung, VP-Senior Credit Officer, Moody’s Investors Service Host: Vittoria Zoli, Analyst – Emerging Markets, Moody’s Investors Service

We explore the impact that geopolitical tensions between the US and China are increasingly having on technology companies, particularly the vital semiconductor supply chain. Which companies are most affected and what are the implications for China’s domestic semiconductor industry? Then at 9.58, we delve into what is supporting revenue growth for global information technology services companies, as growth slows from exceptionally high levels during the pandemic. Guests: Zedric Cheung, Associate Analyst in the Credit Strategy and Standards Group, Moody’s Investors Service; Chenyi Lu, Vice President – Senior Credit Officer and Farah Zakir, Vice President – Senior Analyst both in the Corporate Finance Group, Moody’s Investors Service. Host: Tania Hall, Senior Vice President – Senior Research Writer, MIS Research, Moody’s Investors Service. To read more on this topic, visit the Behind the Bonds page on Moodys.com (some content only available to registered users or subscribers). Related Research: US-China and cross-Strait tensions will lead to lasting semiconductor supply chain shiftsSlowing global growth, US export controls will hit revenue in coming yearsDiversified providers can weather slowing demand; generative AI is new growth leverQ3 update: Bookings grow but new projects will favor incumbent IT service providers

Our industry sector outlooks provide insight into the fundamental business and credit conditions that companies face. But what’s the picture across the 18 sector outlooks right now as macroeconomic conditions shift – which sectors are on the up and which face problems? At 10:35 we take a deep dive into an industry that is hitting the headlines: global real estate, where the sector outlook recently went negative. Financial conditions are tightening, the cost of capital is rising and property values are declining. Guests: Ed DeForest, Senior Vice President, and Lori Marks, Vice President – Senior Credit Officer, both of the Corporate Finance Group, Moody’s Investors Service. Host: Jeff Pruzan, Vice President – Senior Research Writer, Moody’s Investors Service.

In this episode, we discuss China’s stabilizing property sales and improving funding conditions. Then at 9:00, we look at Chinese insurers’ and banks’ exposure to the country’s property sector. Guests: Kelly Chen from the Corporate Finance Group of Moody’s Investors Service, and Qian Zhu and Yulia Wan from the Financial Institutions Group. Host and Segment Leads: Tania Hall, Livia Yap and Danielle Reed from the Research team at Moody’s Investors Service. To read more on this topic, visit the Behind the Bonds and Focus on Finance pages on Moodys.com (some content only available to registered users or subscribers). Related Research: Chinese property market weakness will persist in 2023, dragging on credit quality in multiple sectorsFAQ about mortgage prepayment to Chinese banksFAQ on Chinese insurers' exposure to the property sector

In this episode, we dissect the drivers of global light vehicle sales, automakers’ profit margins and the sector’s rapid electrification shift. Volume improvement will be most pronounced in Western Europe this year after the biggest drop-off on the war in Ukraine and associated supply chain difficulties. Sales in China will also be solid, with the unwinding of pandemic-related restrictions providing a boost to the economy and consumers. Then at 6:45, we look into the growth prospects of electric vehicle battery makers that are powering the EV shift, as well as the risks they face from rapid expansion. Guests: Matthias Heck and Gerwin Ho, both Vice President – Senior Credit Officers in the Corporate Finance Group, Moody’s Investors Service. Host: Jeff Pruzan, Vice President – Senior Research Writer, MIS Research, Moody’s Investors Service. To read more on this topic, visit the Behind the Bonds page on Moodys.com (some content only available to registered users or subscribers). Related Research: Auto outlook goes negative on weakening demand, diminishing marginsElectrification momentum is strong, automakers must invest to remain competitiveStrong electric vehicle demand outweights risks from raw materials, high investments

In this episode, we look at how companies that provide leisure and hospitality services like lodging, casinos, restaurants and cruises are faring. Our research shows that despite growing economic pressures and high inflation many consumers are still eager to splash the cash on entertainment and experiences. But which sectors and regions are likely to benefit the most from this post-pandemic buzz and how long will the party last? Then, at 8:22 minutes, we delve into the world of cinema where many operators are grappling with the credit effects of debt-funded investments made before the pandemic, subsequent shifts in the entertainment landscape and rising costs. Guests: Michael Zuccaro, Vice President – Senior Analyst; Adam McLaren, Vice President – Senior Analyst; Fiona Knox, Vice President – Senior Analyst; all of the Corporate Finance Group at Moody’s Investors Service. Host: Tania Hall, Vice President – Senior Research Writer, MIS Research, Moody’s Investors Service. To read more on this topic, visit the Behind the Bonds page on Moodys.com (some content only available to registered users or subscribers). Related content: Lodging, Cruises and Entertainment – Europe: Credit quality to improve, but remain below pre-pandemic on high costs, weak sentimentCinema Operators – North America and Europe: Flicker of hope for silver screen recovery but credit quality to remain weakGaming — US: US gaming continues to surge, but tougher times aheadHospitality – Global: Outlook remains positive, but growth is slowing as recovery becomes more uneven

Moody’s analysts discuss accelerating electric vehicle sales’ effects on US auto insurers and auto finance captives, and implications for state fuel taxes. Speakers: Matthias Heck, VP – Senior Credit Officer, Moody’s Investors Service; Inna Bodeck, VP – Senior Analyst, Moody’s Investors Service; Jasper Cooper – VP – Senior Credit Officer, Moody’s Investors Service; Ted Hampton, VP – Senior Credit Officer, Moody’s Investors Service Hosts: Nicholas Samuels, Senior Vice President, Moody’s Investors Service; Danielle Reed, VP – Senior Research Writer, Moody’s Investors Service Related content on Moodys.com/autotransformation (may only be available to registered users or subscribers): Electrification momentum is strong, automakers must invest to stay competitiveUS auto finance captives’ evolving portfolios will carry more electric vehicles and greater riskAuto insurers’ costs and pricing will rise as electric vehicles grow more popularElectric vehicles raise carbon transition risk for states' highway revenue bonds

In this episode, we examine the effects of rising interest rates on real estate operating companies and real estate investment trusts in two major regions – Europe and Asia-Pacific. In the former, higher rates have driven a deterioration in credit quality across the sector. And we expect commercial property values to decline in the coming months. On the other hand, business conditions are generally better in Asia-Pacific and valuations have held steady. At 11:50, we check in on the state of the market there, where China’s reopening is having positive spillover effects. Guests: Oliver Schmitt, Vice President – Senior Credit Officer; Stephanie Lau, Vice President – Senior Credit Officer, Yu Sheng Tay, Analyst; all of the Corporate Finance Group at Moody’s Investors Service. Host: Jeff Pruzan, Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit the Behind the Bonds page on Moodys.com. (Some content available only to registered users or subscribers.) Related research: Real Estate – Europe: Corporate credit quality will deteriorate with rising rates, falling property valuesREITs & REOCs – Asia-Pacific: Modest earnings growth in 2023 will keep credit quality stableProperty – Hong Kong SAR, China: Full reopening of border is credit positive for Hong Kong property companies

Investors have long seen the vast healthcare industry as a defensive sector. In good times and bad, consumers will still need everything from pharmaceuticals to medical devices to for-profit hospitals. But how strong is the healthcare industry today? Companies in all healthcare segments are wrestling with ongoing pressure to reduce costs from governments and private insurers alike. With a wave of maturities slowly approaching, how strong is the threat of US healthcare company defaults? At 10:34 we cross the Atlantic to take a closer look at risks and opportunities this year for healthcare companies based in Europe. Guests: Ola Hannoun-Costa, Corporate Finance Group, Associate Managing Director; Jean-Yves Coupin, Vice President – Senior Analyst; Marie Fischer-Sabatie, Senior Vice President; and Frederic Duranson, Vice President – Senior Analyst, all of the Corporate Finance Group at Moody’s Investors Service. Host: Tania Hall, Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit the Behind the Bonds page on Moodys.com. (Some content available only to registered users or subscribers.) Related Research: Developments to watch in 2023: Humira biosimilar entry, obesity drugs and M&ACredit stress is rising, setting the stage for more downgrades and defaultsDevelopments to watch in 2023: US drug pricing policy, cost inflation and M&ARapid decline in COVID-19 testing, prices is credit negative for European laboratories

Reduced supplies of natural gas and soaring prices stemming from Russia’s invasion of Ukraine are squeezing companies in Europe, which are also grappling with slowing economic growth, high inflation and rising interest rates. In the first segment of this podcast, we look at the effect of these stresses on European companies’ credit quality and the most vulnerable sectors. Then, at 9:35, we explain why the US will have trouble boosting its ability to export its abundant natural gas to Europe. Guests: Ruosha Li, Assistant Vice President – Analyst, Moody’s Credit Strategy and Research and Elena Nadtotchi, Senior Vice President, Moody’s Corporate Finance Group, both of Moody’s Investors Service. Host: Jeff Pruzan, Vice President – Senior Research Writer, Moody’s Investors Service. To read more on this topic, visit the Behind the Bonds page on Moodys.com. (Some content available only to registered users or subscribers.) Related research: 2023 Outlook - Negative as financial conditions tighten, inflation hits consumersCredit hit from Europe’s energy crisis will manifest over longer period compared to COVID 19Demand and policy uncertainty will temper energy industry's overall strength in 202

In this episode, we discuss our 2023 outlook for nonfinancial companies across the globe. We start with what's driving fundamental credit conditions in North America, EMEA, China, Latin America and Asia-Pacific excluding China, and how those drivers differ across the regions. Then, at 10:56 minutes, we take a deep dive into the consumer products sector and factors affecting demand next year for everything from toilet paper to tobacco, beauty to beverages. Guests: Myriam Durand, Managing Director, and Linda Montag, Senior Vice President, both of the Corporate Finance Group, Moody’s Investors Service. Host: Tania Hall, Vice President - Senior Research Writer, MIS Research, Moody’s Investors Service. To read more on this topic, visit The Credit Cycle Turns page on Moodys.com (some content only available to registered users or subscribers).