From Moody’s Investors Service:
Online retailers, particularly Amazon.com, Inc. and Ebay, Inc., have proven the viability of the internet as a retail channel. But the traditional brick-and-mortar retailers have the ability and will to eventually become powerful players in the markets that the online retailers have largely developed.
The office supply and auto parts sectors are among the furthest along in the integration of physical stores and online capabilities. They have a large number of stores and potentially the most advanced and efficient delivery networks and integrated web sites.
Internet sales, while continuing to grow rapidly, still represent only a mid-single-digit percentage of total US retail sales, a number that includes the internet operations of the brick-and-mortar retailers. Many consumers have not yet made meaningful online purchases, and some potentially never will. Smartphones, which are key to the concept of “showrooming,” are still not optimally used or penetrated.
Most brick-and-mortar retailers already have fully developed proprietary supply chains that could be further leveraged to accommodate online sales.
The sales-tax advantage that many online retailers presently enjoy seems to be abating as states step up their efforts to force collection of these taxes.
See the full report ($) US Retail: Brick-and-Mortar Retailers Beginning to Flex Muscle Online
Brick-and-mortar retailers, especially on the big box side, already have internet capability, and in some segments such as office products, have been using the web for over a decade.
Technorati Tags: Amazon, auto parts, eBay, office suppliers, online-retail, retailers
The Greek parliament’s approval of an additional EUR13.5bn of austerity measures shows that the near-term risk of Greece leaving the eurozone has receded, Fitch Ratings says. But Greece needs further debt relief, the burden of which will fall on official sector creditors, if public debt sustainability is to be brought back on track.
From Fitch Ratings
We think that only a combination of deeper interest rate cuts on eurozone loans, the European Central Bank giving up profits on its Greek government bond holdings, and the migration of bank support costs to the European Stability Mechanism could secure lasting public debt sustainability.
Greece’s sovereign debt restructuring in April 2012 has left 70% of Greek government debt in the hands of official creditors, meaning there is little to be gained from further private sector involvement.
Our new “base case” therefore factors in a two-year extension and weaker economy, and points to a further deterioration in Greek public debt dynamics versus our March forecast. It sees public debt/GDP peaking at 192% in 2014-2015 (our previous forecast, in March, was for a 2013 peak of 170%), and suggests the ratio is unlikely to fall below 150% of GDP by 2020. We rate Greece ‘CCC’, reflecting the real possibility of default.
See the summary ($) Fitch: Vote Cuts Greek Exit Risk, Onus Now on Official Creditors and the full Fitch Ratings report ($) on Greece
Technorati Tags: euro, Greece, sovereign-debt
From Standard & Poor’s Credit Research
Sandy generated insured losses of as much as $20 billion, according to early estimates, and total economic damages of up to $50 billion. The high end of those estimates would make Sandy, in real terms, the third-costliest storm in U.S. history, after hurricanes Katrina in 2005 and Andrew in 1992.
Yet although the storm hit the nation’s most densely populated region, strong advance planning by local, state, and federal authorities helped mitigate its impact.
As such, Sandy will likely have no near-term impact on our ratings on investment-grade infrastructure, transportation, communication and local government issuers, and only a limited impact on re/insurers.
While these efforts may have curtailed the storm’s credit impact in the near term, certain issuers, both public and private, could come under pressure over time, largely because of lost revenues, or delays in reimbursements from insurance companies, federal aid, or other sources. The latter could prove especially significant for some telecom companies whose operations are directly tied to the restoration of power and whose operations are concentrated in areas hit by the storm.
See the full report ($) Sandy Blows Through The Northeast With Only A Minimal Ratings Impact
Technorati Tags: municipal-bonds, Sandy, state-and-local-government, utilities
Automobile component suppliers such as BorgWarner, Delphi and ZF Friedrichshafen stand to benefit the most from the new fuel economy and emissions standards enacted in August 2012 by the U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA).
From Fitch Ratings
Fitch expects auto manufacturers will employ various solutions to meet the new standards, including the development of more efficient powertrains, an increased use of electrification and a greater use of lightweight materials. However, much of the development work will go towards increasing the fuel efficiency of traditional internal combustion engines, which Fitch believes will still be the primary form of propulsion for most light vehicles in 2025.
Although the new standards do not take effect for several years, auto manufacturers and suppliers are already investing heavily in research and development to meet the new requirements, making this a credit issue now. Achieving the new targets will be a significant challenge for auto manufacturers, but certain auto suppliers stand to benefit significantly from the new rules.
In particular, suppliers of technologies that improve engine fuel efficiency, transmission and related components suppliers, and suppliers of technology used in hybrid and electric propulsion systems stand to benefit the most.
Nonetheless, meeting the standards will involve various risks, including a potential for problems with new technologies, materially higher vehicle production costs, and, perhaps, a lack of customer acceptance of vehicle design changes.
See the full report ($) The New U.S. Auto Fuel Economy and Emissions Standards: What They Are and Who Will Benefit
Technorati Tags: auto suppliers, automotive, BorgWarner, Delphi Corp, ZF Friedrichshafen
From Moody’s Investors Service:
Moody’s Analytics estimates the clean-up bill for last week’s Hurricane Sandy, including infrastructure repair and replacement and assistance for affected citizens at $30 billion. We expect insurance will cover half of this, with the remainder borne both publicly and privately, leaving the federal government’s portion of the clean-up bill at approximately $10 billion. The federal budget includes $7.5 billion for the Federal Emergency Management Agency, and spending authority for additional amounts.
But in the context of approximately $3 trillion in US federal spending, these amounts are too minor to change the financial profile of the government of the United States (Aaa negative).
Past natural disasters show there are rarely any discernable or long-lasting macroeconomic implications. Nor do natural disasters diminish the US government’s capacity or willingness to service its outstanding debt.
See the full report ($) No Detrimental Effect from Sandy on US Sovereign Creditworthiness
Technorati Tags: Sandy, US sovereign debt
From Moody’s Investors Service:
New rules on affordability announced by the UK Financial Services Authority (FSA) following its Mortgage Market Review (MMR) will, over the long term, be credit positive for UK prime RMBS and credit negative for UK non-conforming RMBS, says Moody’s Investors Service.
The new rules, which are broadly in line with the proposals announced on 19 December 2011, will also be credit neutral for UK RMBS in the short term.
“In the long term, the new rules will be credit positive for UK prime RMBS as they introduce affordability rules, which cover areas such as interest only and proof of income,” says Sophia Velissaratou, a Moody’s Associate Analyst. “However, the new rules will be credit negative for UK non-conforming RMBS over the long term, as it will be more difficult for these weaker borrowers to take advantage of proposed waivers on affordability checks,” adds Ms. Velissaratou. As such, these borrowers will continue to have extremely limited refinancing options.
Technorati Tags: residential mortgage-backed securities, U.K. RMBS
