Superstorm Sandy will slash earnings at New Jersey casinos and benefit home repair and discount retailers but have limited impact on other sectors and is unlikely to trigger credit downgrades, credit agency Moody's Investors Service said.
While potential credit downgrades exist, no rating actions were taken after Hurricane Irene flooded parts of the U.S. Northeast last year and no ratings have been put on review for downgrade or negative ratings after Sandy, Moody's told investors on Tuesday.
Such actions were taken after Katrina in 2005, one of the deadliest and most destructive hurricanes to ever slam the United States. To the best of Moody's knowledge, large natural disasters do not result in payment defaults, with the exception of one non-rated transportation issue after Katrina.
"Even for the hardest hit areas [by Sandy], we don't expect to observe any payment default by our issues barring any significant change in federal policy regarding FEMA and emergency aid," said Gail Sussman, a managing director at Moody's.
FEMA is the Federal Emergency Management Agency. Sandy has killed at least 113 people in the U.S. and Canada and knocked out power to millions of people. It has swamped seaside towns and inundated New York City's streets and subway tunnels.
Sandy killed 69 people in the Caribbean.
Electric utilities including Consolidated Edison Co. of New York Inc. suffered costly damage but should recover their costs, Moody's said. Wireless telecommunications service providers such as Verizon Communications Inc. and AT&T Inc. were also hurt, but the affect on these carriers will be "negligible."
Building product companies that provide roofing-related materials are apt to see stronger-than-usual fourth-quarter results, Moody's said.
Sandy's effect on the gaming and lodging industries is centred on Atlantic City, Moody's said. Revenues there will be down by 25 per cent in both the fourth quarter and the first quarter, and earnings will be down by up to 50 per cent, Moody's said. It said Caesar's Entertainment, Tropicana Entertainment and single-property operators Revel Atlantic City and Marina District Finance Co would be hit.
The storm will not have material effect on U.S. retail sales, but beneficiaries will include Home Depot Inc. and Lowe's Co. Inc., as well as discounters such as Wal-Mart Stores Inc. and Target Corp.
U.S. airlines Delta Air Lines Inc., United Continental Holdings Inc. and JetBlue Airways Corp. will see a minimal impact on their credit profiles, Moody's said.
U.S. East Coast freight railroads CSX Corp. and Norfolk Southern Corp. have seen significant disruptions and could see lower cash flows and higher costs in the current quarter. The storm is not expected to affect long-term operating performance, liquidity or credit ratings for the railroads.
Fewer working days as a result of the storm could reduce fourth-quarter revenue by about 5 per cent at staffing services company Manpower Inc. and food services provider Aramark Holdings Corp. Real estate services company Realogy Group LLC could take a hit, while ServiceMaster Limited Partnership and GCA Services Group Inc. stand to benefit from post Sandy recovery work, Moody's said.
Sandy will have a minimal effect on revenues and operating profits of health-care providers and is unlikely to affect the credit ratings of media companies, including cable operators, newspaper publishes and outdoor advertisers. Fast-food restaurants could see slightly lower sales and profits.
Moody's and other credit agencies rate the debt profile of companies, and their analysis sets the rates at which they can borrow.