EU COMMUNICATIONS: Chorus: Issuer Notes (7Y €400mn WNG)
(CNUNZ; Baa2/BBBpos/NR)
Well positioned within current ratings. The potential sale of gov’t-held subordinated equity could trigger a reclassification as debt and is a key headwind; we see potential fallout as absorbable though a 1x leverage impact could put pressure on Moody’s rating albeit headroom would be maintained at S&P (Moody’s haven’t indicated how they would treat the situation). That said, the roadshow implies the company could repurchase the shares “in a credit neutral manner” so the outcome is uncertain.
We think fixed-line companies should sit tighter than equal-rated towercos given their regulated, monopoly-like CFs and lower volatility (less exposed to lease-growth fluctuations and churn/consolidation cycles). We also note lower leverage for CNUNZ than for CLNXSM/AMT (for which S&P is expecting ~6.5x/mid-5x) albeit CNUNZ lacks the diversification of these names.
- Operates NZ fixed network; regulated revenue from broadband/fiber infrastructure access.
- Effectively a regulated monopoly position. Telco services spun off into Spark NZ in 2011.
- Affirmed by Moody’s in May. Leverage 4.5x as of H125 vs. thresholds of 4.25x/5.25x.
- Outlook raised by S&P in Nov. FFO-to-debt 17% in FY25 vs. thresholds of above/below 13%.
- S&P see threshold equivalent to <6x/>7x debt-to-EBITDA. FY25: 4.6x; seen flat through FY28.
- They also note that management’s 5x net leverage target equates to FFO/debt of ~15%.
- CapEx outlook seems manageable with NZ fiber coverage/uptake at 87%/73% respectively.
- Cons FY25-28 CAGR: Rev +2.7%, EBITDA +3.9%, CapEx -5.9%, FCF +16.5%. FY28 lev seen 4.3x.
- Key to the outlook is October news from the National Infra Funding & Infra Limited (NIFF).
- NIFF instructed to investigate sale of assets (incl. NZD 240m/683m CNUNZ debt/sub equity).
- S&P note if the equity moves to less supportive owners, it will likely reclassify as debt.
- We calc ~1x impact to FY25 lev (company uses rating agency methodology). 3% FFO/debt hit.
- “Chorus may participate in the sale process if economically rational and would finance any acquisition in a credit neutral manner”.
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GILT TECHS: (Z5) Corrective Bear Cycle
- RES 4: 93.33 Low Nov 13 a gap high on the daily chart
- RES 3: 93.07 20-day EMA
- RES 2: 92.85 High Nov 14
- RES 1: 92.44 50-day EMA
- PRICE: 92.12 @ 08:10 GMT Nov 17
- SUP 1: 91.94 Intraday low
- SUP 2: 91.82 High Sep 11 and a former key breakout level
- SUP 3: 91.67 50.0% retracement of the Sep 3 - Nov 4 bull leg
- SUP 4: 91.12 61.8% retracement of the Sep 3 - Nov 4 bull leg
Gilt futures gapped sharply lower on Friday. For now, a move down is considered corrective and the next key support to watch lies at 91.82, the Sep 11 high and a former key breakout level. Moving average studies remain in a bull-mode position, highlighting a dominant uptrend. First resistance to watch is 92.85, the Nov 14 high. On the downside, a break of 91.82, the Sep 11 high, would strengthen a bear theme.
SWITZERLAND DATA: Q3 GDP Downwardly Surprises, Pharma Drags
Swiss GDP growth surprised to the downside in Q3, at -0.5% Q/Q (-0.1% consensus, 0.1% Q2), seeing its worst quarterly growth rate since Q1 2020.
- While undoubtedly weak, we do not see how the (singular) print should move the needle for the SNB, which views its monetary policy already as "accommodative". Downside pressure on inflation for continued headline CPI readings below 0% would likely be needed to put an SNB cut below 0% firmly on the table again.
- "Driven by a sharp decline in value added in the chemical and pharmaceutical sector, industry as a whole recorded negative growth. The services sector grew at a below-average rate", SECO adds.
- Forward-looking forecasts are more optimistic; KOF institute revised upwards its Swiss GDP forecasts late Friday, saying they "expect annual GDP growth [to rise] by between 0.3% and 0.5% compared to a tariff rate of 39%. This means that the seasonally adjusted economic growth forecast for 2026, currently estimated at 0.9%, will once again be well above 1%".
SILVER TECHS: Sights Are On The Bull Trigger
- RES 4: $56.153 2.500 proj of the Aug 20 - Sep 16 - 17 price swing
- RES 3: $55.444 2.382 proj of the Aug 20 - Sep 16 - 17 price swing
- RES 2: $55.000 Round number resistance
- RES 1: $54.480 - High Oct 17 and the bull trigger
- PRICE: $51.242 @ 08:15 GMT Nov 17
- SUP 1: $49.604 - 20-day EMA
- SUP 2: $47.274/45.557 - 50-day EMA / Low Oct 28
- SUP 3: $41.135 - Low Sep 17
- SUP 4: $38.087 - Low Aug 27
Trend signals in Silver remain bullish and last week’s gains reinforce current conditions. Attention is on key resistance and the bull trigger at $54.480, the Oct 17 high. Clearance of this level would confirm a resumption of the primary uptrend and open $55.444, a Fibonacci projection. Price remains above support at the 50-day EMA, at $47.274. A clear breach of this average would signal scope for a deeper retracement.
