standard & poor’s corporate ratingsglobal corporate average cumulative default rates 1981-2010...

Standard & Poor’s Corporate Ratings Methodology and Rating Trends

Presentation à l’AF2I

Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2011 Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.

Oct. 24, 2012

Blaise Ganguin, Practice Leader EMEA Corporates

Patrice Cochelin, Analytical Manager EMEA Telecoms & Technology

Our Presence

2.Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Mexico City, Mexico

U.S.:Multiple Offices

Toronto, Canada

India:

Moscow, Russia

Madrid, Spain

Paris, France

London, U.K.

Stockholm, Sweden

Tokyo, Japan

Seoul, South Korea

Milan, Italy

Frankfurt, Germany

Global Footprint: 32 Locations, 23 with Rating Serv ices Analytical Staff

China Multiple Offices

Dubai, UAE

Kuala Lumpur, Malaysia

Tel Aviv, Israel

Istanbul, Turkey*

Taipei, Taiwan

• Beijing• Hangzhou• Hong Kong • Shanghai

Warsaw, Poland


Buenos Aires, Argentina

Santiago, ChileAffiliate: Feller Rate

Sao Paulo, Brazil

India: Multiple Offices

Johannesburg, South Africa

MelbourneSydney

Jakarta, IndonesiaAffiliate: PEFINDO

Singapore

Kuala Lumpur, MalaysiaAffiliate: RAM

*Business Development office, opened September 2011

• Boston, MA• Centennial, CO• Chicago, IL• Dallas, TX• New York, NY• San Francisco, CA• Washington, DC

• Ahmedabad• Bangalore• Chennai• Hyderabad• Kolkata• Mumbai• New Delhi• Pune

Australia:Multiple Offices

In Europe we operate from 7 locations (Total Rating Employees)

47786

4427


104

3934

Ratings Definitions


What a credit rating is and what it is not

What it is:

� Forward-looking opinions about relative credit risk, i.e., the creditworthiness of an entity or its securities that …

� … strive to be globally comparable across sectors

And what it is not:

� Investment advice, a recommendation to purchase, sell or hold securities, or a comment as to market price or suitability for an investor

� a measure of liquidity or market value

� a way of defining “good” or “bad”


� Incorporate views on relative likelihood of default that …

� refer to the timely payment of interest and principal and …

� … are applied to entities and securities

For S&P Ratings Services Internal Use Only

� a way of defining “good” or “bad” companies, or a direct assessment of corporate governance

� an audit of the company or its auditors

� a guarantee of credit quality or of future credit risk

Long-Term Ratings

The ABC Of Our Rating Scale

Global Corporate Ratings Distribution


Global Corporate Average Cumulative Default Rates 1 981-2010

20%

40%

60%

Over 5 years, the global corporate default rate for investment grade companies was 1%, compared with 17% for speculative grade com panies


9.

12 3 4 5

6 7 8 9 10 11 12 13 14 15

AAAAAA

BBBBBBCCC/C 0%

20%

Years

Source: Standard & Poor's Global Fixed Income Research

IG

NIG

Ratings Direction: Ratings Are Actively Monitored

Outlook• Given to all long term

Issuer ratings• Assesses the potential

direction of a rating over the next 2 years (for investment grade credits)

• Given to all long term Issuer ratings

• Assesses the potential direction of a rating over the next 2 years (for investment grade credits)

CreditWatch•Possible near-term change (usually within 90 days)•Focuses on identifiable events and/or short-term trends that deviate from

•Possible near-term change (usually within 90 days)•Focuses on identifiable events and/or short-term trends that deviate from


investment grade credits) or over 1 year (for speculative grade credits)

• 4 Options: Positive, Negative, Stable, Developing

• Not necessarily a precursor to a rating change or Creditwatch

investment grade credits) or over 1 year (for speculative grade credits)

• 4 Options: Positive, Negative, Stable, Developing

• Not necessarily a precursor to a rating change or Creditwatch

trends that deviate from expectations•Additional information necessary•3 options :

•Positive•Negative•Developing

trends that deviate from expectations•Additional information necessary•3 options :

•Positive•Negative•Developing

Issue Ratings

Issuer Rating

� Capacity and willingness of a

corporation/group to meet financial

commitments

� Our opinion of risk of default

Recovery Rating


� Estimate of nominal recovery of

principal

� Our opinion of risk of loss given

default

Issue Rating

� Combination of risk of default and

loss given default

Corporate Rating Methodology


Analytical Framework: Corporate Issuers

RATING

Business Risk

• Country Risk

• Industry Characteristics

• Company / Competitive Position

• Profitability / Peer Group Comparison

• Management & Strategy

Excellent

Strong

Satisfactory

Fair

Weak

Vulnerable


RATING

FinancialRisk

• Accounting

• Governance, Risk Tolerance, Financial Policy

• Cash Flow Adequacy

• Capital Structure, Asset Protection

• Liquidity / Short Term Factors

Minimal

Modest

Intermediate

Significant

Aggressive

Highly Leveraged

Relationship Between Business And Financial Risk Pr ofiles


The ratings indicated in each cell of the matrix are the midpoints of a range of likely rating possibilities. This range would ordinarily span one notch above and below the indicated rating.

The ratings indicated in each cell of the matrix are the midpoints of a range of likely rating possibilities. This range would ordinarily span one notch above and below the indicated rating.

Linking of Business Risk to Financial Risk

Investment Grade Ratings

Investment Grade Ratings

High Yield Ratings

High Yield Ratings

Business anchors rating outcome, with financial risk shading up or

Financial factors

key determinant


shading up or down

key determinant

Relative Weights of Business and Financial Factors Vary Through Spectrum

Rating Government-Related Entities (GREs)

1 - GRE's stand-alone credit profile (SACP)

2 - Opinion of the likelihood of extraordinary government support


3 - SACP vs. Government's rating

GRE rating

Adjustments to Financial Statements


Why We Adjust Financial Statements: Three Key Objec tives

• Transparency – To provide issuers, market participants and regulators with full access on financial data, adjustments and ratios which underpin our rating decisions.

• Consistency – To set up a common, unique framework to perform credit analysis across various GAAPs and accounting options.


credit analysis across various GAAPs and accounting options.

• Comparability – To enable comparisons across corporates, while financing modes and accounting choices frequently differ.

Why We Adjust Financial Statements: Limitations

• Adjusted figures do not supersede unadjusted ones

• Adjustments often need to change to adapt to evolving realities

• Financial adjustments are used to assess probability of default, not recovery expectations


• We do not question the validity of companies’ financial reporting under applicable GAAPs, nor the audit process

Adjusting Financial Statements: France Telecom Examp le

As of Dec. 31, 2011. € Mil. DebtShareholders'

equity Revenues EBITDAOperating

incomeInterest

expense

Cash flow from

operationsDividends

paid

Reported 41,931.0 27,573.0 45,277.0 15,674.0 7,948.0 2,066.0 12,879.0 4,386.0 S&P adjustments

Operating leases 5,430.6 -- -- 265.7 265.7 265.7 1,012.8 --

Debt-like hybrids 210.0 (210.0) -- -- -- -- -- --Postretirement benefit obligations 1,219.2 -- -- (24.0) (24.0) 30.0 (53.0) --Surplus cash and near cash investments (7,544.0) -- -- -- -- -- -- --Share-based compensation expense -- -- -- 21.0 -- -- -- --Deconsolidation / Consolidation 525.0 -- -- 673.3 673.3 -- -- --

Asset retirement obligations 421.9 -- -- -- -- -- -- --


Reclassification of working-capital cash flow changes -- -- -- -- -- -- (369.0) --

Minority interests -- 2,019.0 -- -- -- -- -- --

Debt - Other (2,756.0) -- -- -- -- -- -- --EBITDA - Gain/(Loss) on disposals of PP&E -- -- -- (246.0) (246.0) -- -- --

EBITDA - Other -- -- -- (680.0) (680.0) -- -- --

EBIT - Other -- -- -- -- (97.0) -- -- --

Total adjustments (2,493.4) 1,809.0 0.0 10.0 (108.0) 295.7 590.7 0.0 Standard & Poor's adjusted

amounts Debt Equity Revenues EBITDA EBIT

Interest expense

Funds from operations

Dividends paid

Adjusted 39,437.6 29,382.0 45,277.0 15,684.0 7,840.0 2,361.7 13,469.7 4,386.0

Rating Trends


European Economic Outlook• The outlook for Europe continues to worsen - we now expect zero GDP growth for

the eurozone in 2013.

• The growth gap between north and south remains acut e and we expect even deeper contractions in Italy and Spain than we anti cipated a month ago.

• Germany remains the bright point, but even here the re is pressure and we have trimmed our 2013 GDP forecast to +1.2% from +1.4%.

• If there is some good news it is that we view the E CB’s OMT scheme as a bold measure that should lessen the likelihood of a euro breakup.


Base Case : The Eurozone’s New Recession—Confirmed

While the European economic

outlook remains somewhat

uneven across countries, in

most economies it generally

remains dominated by the

deleveraging process occurring

almost simultaneously in the

public sector, the private

sector, and the financial sector.

Meanwhile, softness in

emerging markets now appears

more protracted than we


more protracted than we

initially anticipated.

Those factors lead us to

forecast another year of very

weak growth in 2013 in France

and in the

U.K., and further declines in

output in Italy and Spain.

Recession Deepening in GIPS; Unemployment Pressured

Real GDP (%yy)

Source: Eurostat, Thomson Reuters Datastream Sep 2012

-8

-6

-4

-2

0

2

4

6

06 07 08 09 10 11 12

Germany France Italy Spain

Unemployment rates (%)

Source: Eurostat, Thomson Reuters Datastream Sep 2012

4

8

12

16

20

24

28

06 07 08 09 10 11 12

Germany France Italy Spain


• Eurozone bordering recession.

• Q2 GDP -0.2% qq; -0.5% yy

• Investment (-0.8% qq); consumer exp. (-0.2% qq); net exports (+0.2% qq)

• Outlook: weak periphery and falling net exports to weigh on Q3 growth

• Eurozone unemployment reached a record 11.3% in July; 2.4m jobs lost since Apr 2011

• High cost of redundancy suggests hidden unemployment is high, negatively impacting productivity

Source: Eurostat, Thomson Reuters Datastream Sep 2012 Source: Eurostat, Thomson Reuters Datastream Sep 2012

Eurozone PMI in Recession; German Confidence ErodesConsumer Confidence Survey (Balance SA)

Source: Eurostat Sep 2012

-50

-40

-30

-20

-10

0

10

20

06 07 08 09 10 11 12

Germany France UK Italy

Manufacturing Purchasing Managers Index

Source: Markit Sep 2012

30

35

40

45

50

55

60

65

70

06 07 08 09 10 11 12

Germany France UK Italy


• Eurozone Aug. manuf. PMI < 50 for 1yr

• New orders fallen for 13mths – some early cycle weakness in cap goods

• Outlook – weak: tight fiscal policy, rising unemployment, falling disposable incomes

• Support – lower commodity prices / € ?

• Eurozone July consumer confidence -24.6, weakest since June 09

• Even in Germany, consumers retrench as sovereign crisis escalates

• Outlook – weak: France ~€33bn austerity budget 26 Sept. is more bad news

Source: Eurostat Sep 2012Source: Markit Sep 2012

0 0 0

2

0

7

2

0

21

5

3 3

1 12

43 3

1 1 1

45

1

4

0

10

76

4 43

6

3

5

12

4 4

6

2

9

1213

65

65 5

6

0

5

2

4 4

8 8

3

6

3 3

0

1

5

3

0 0

4

21

4

1

32

0

3

65

4 4

2

8

3

Investment Grade

EMEA – Monthly Upgrades and Downgrades Since 2009Upgrades

Downgrades


1 2 2 13

6

23

1

5

2 1

43

2

64 4 4

2

5

10

7

4

910

65 4

75

3

76 6

3

65 4

8 8

6

10

20

11

1415 15

4 42

10

7

0

7

2 24

24

23 3

2

6

2

5

10

68

4 5 4 56

13 12

9

6

34

13 13Speculative Grade

IG and SG Upgrades and Downgrades: Corporates, excluding Financial and InsuranceIncludes downgrades to default and includes upgrades from defaultSource: Core Report Creation Date: 7/24/2012.

EMEA- Rating Distributions

60

80

100

120

No.

of I

ssue

rsEurope, Middle East, Africa


Company Counts: U.S. Corporates, excluding Financial and InsuranceRatings Distribution – March 31st 2009 versus June 30th 2012Source: Global Ratings Reporting Group: Report Creation Date: 7/24/2012

AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC+ CCC CCC- CC SD D

Mar 31st 2009 2 3 5 17 17 34 57 76 51 55 36 30 23 25 17 9 9 2 0 4 1 0

June 30th 2012 1 1 5 18 17 36 50 81 79 73 57 64 58 91 106 53 15 6 1 5 2 2

0

20

40

No.

of I

ssue

rs

European Corporate Defaults on the Rise

• Speculative grade default rate (LTM) could reach 6.3% by June 2013

• Event risk remains significant, with a 40% chance of o ur downside scenario occurring, resulting in 8.1% LTM speculative grade default rate


March 31 st, 2009 June 30th, 2012

EMEA – CreditWatch and Outlook Distributions

0%

12% 4%

0%

6%0%

Investment Grade - 312

Developing

Negative

Positive

0%

11%3%

0%

4% 0%

Investment Grade - 361


Note: U.S. Corporates ex-Financials.CreditWatch Distributions – March 31st 2009 versus June 30th 2012Source: Global Ratings Reporting Group: Report Creation Date: 7/24/2012

78%

Stable

WatchDev

WatchNeg

WatchPos82%

March 31 st, 2009 June 30 th, 2012

EMEA – CreditWatch and Outlook Distributions

1%

26%

1%

8%

0%

Speculative Grade - 155

Developing

Negative

Positive

0%

19%

4%

0%3%

1%

Speculative Grade - 456


Note: U.S. Corporates ex-Financials.CreditWatch Distributions – March 31st 2009 versus June 30th 2012Source: Global Ratings Reporting Group: Report Creation Date: 7/24/2012

6%

58%

Positive

Stable

WatchDev

WatchNeg

WatchPos

4%

73%

EMEA Industrials EBITDA Margins – 2011 vs. 2007

19.4

20.2

5

10

15

20

25

30

35

40

45

50

EB

ITD

A M

arg

in (x)


Source: Standard & Poor’s as of 10/26/2011, Note: S&P Adjusted EBITDA, 2011 data last reported rolling twelve months, 2007 and 2011 statistics cover the same companies“EBITDA Margin” = (Operating profits before interest income, interest expense, income taxes, depreciation, amortization and asset impairment.) / (Revenues)

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2011 2007 2011 Median 2007 Median

EMEA Industrials EBITDA Interest Coverage – 2011 vs. 2007

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Source: Standard & Poor’s as of 10/26/2011, Note: S&P Adjusted EBITDA, 2011 data last reported rolling twelve months, 2007 and 2011 statistics cover the same companies“EBITDA Interest Coverage” = (Operating profits before interest income, interest expense, income taxes, depreciation, amortization and asset impairment. Excludes undistributed equity earnings of affiliates.) / (The gross amount of interest incurred (including amounts capitalized), adjusted for charges related to items that we add to debt; no subtraction of interest income. )

EMEA Industrials Debt Leverage – 2011 vs. 2007

3.0

2.7

0

2

4

6

8

10

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Source: Standard & Poor’s as of 10/26/2011. Note: S&P Adjusted Debt and EBITDA, 2011 data last reported rolling twelve months, 2007 and 2011 statistics cover the same companies“Debt Leverage” = (Total short- and long-term borrowings of the company (including maturities), adjusted by adding a variety of on- and off-balance sheet financing arrangements pursuant to our adjustment methodology, and subtracting surplus cash, where applicable) / (Operating profits before interest income, interest expense, income taxes, depreciation, amortization and asset impairment.)

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2011 2007 2011 Median 2007 Median

EMEA Corporate IG Issuance Picking Up Despite Volat ility

60

80

100

120

140

160€

billi

on

100

150

200

250

bps


0

20

40

60

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

Q3

2007

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

0

50

EU-30 Emerging Markets iTtraxx 5yr Corp CDS (rhs)

Source: Dealogic, iTraxx – June 30th, 2012

Execution Challenging for EMEA HY Corporate Issuers

10

15

20

25

€ bi

llion

300

400

500

600

700

800

900

1000

bps


0

5

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

Q3

2007

Q4

2007

Q1

2008

Q2

2008

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2009

Q3

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2010

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2010

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2011

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2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

0

100

200

300

EU-30 Emerging Markets iTraxx Crossover Index (rhs)

Source: Dealogic, iTraxx – June 30th, 2012

Total Debt Maturities- Europe (Number of Issue’s & $ Billion Amount)

200

250

300

350

400

450

500

No.

Of I

ssue

s/U

S$

in B

illio

ns


0

50

100

150

Issues Amount Issues Amount Issues Amount Issues Amount Iss ues Amount Issues Amount

2012 2013 2014 2015 2016 2017

No.

Of I

ssue

s/U

S$

in B

illio

ns

Investment Grade Speculative Grade

Standard & Poor’s Rated Debt (Includes Bonds & Loans)July 1st, 2012Note : “Speculative Grade” category includes Defaulted ratings “D”

Total Debt Maturities- Middle East (Number of Issue’s & $ Billion Amount)

30

40

50

60

No.

Of I

ssue

s/U

S$

In B

illio

ns


0

10

20

Issues Amount Issues Amount Issues Amount Issues Amount Iss ues Amount Issues Amount

2012 2013 2014 2015 2016 2017

No.

Of I

ssue

s/U

S$

In B

illio

ns

Investment Grade Speculative Grade

Standard & Poor’s Rated Debt (Includes Bonds & Loans)July 1st, 2012Note : “Speculative Grade” category includes Defaulted ratings “D”

Industry Specific Maturities– Europe (By Issue Amount)

0

50

100

150

200

250

300

350

UT

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2012 2013 2014 2015 2016 2017

Standard & Poor’s Rated Debt (Bonds & Loans)

July 1st, 2012

Industry Specific Maturities– Europe ($ amount)

0

50

100

150

200

250

300

TE

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S

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July 1st, 2012

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July 1st, 2012

Appendix

Useful links and research


Useful links and research

S&P Useful LinksDefault Studies, Credit & Economic Trends:

http://www.standardandpoors.com/ratings/gfir/en/eu

Global Leveraged Finance & Recovery Ratings:

http://www.standardandpoors.com/ratings/recovery-ra tings/en/eu/index.html

Understanding Ratings:

http://www.understandingratings.com

Bank Ratings Framework:

http://www.standardandpoors.com/AI4FI

European Sovereign Ratings and Related Material

http://www.standardandpoors.com/ratings/sovereign-a ctions/en/us

CreditMatters TV:

http://video.standardandpoors.com/


http://video.standardandpoors.com/

Standard & Poor’s Sector Books (EMEA):

CreditMatters Interact – A Page for all Digital Book Links

http://www.standardandpoors.com/interact

Industry Risk Analysis


Our 2008-2010 Key Industrial Financial Ratios – Long Term

Adjusted Key Industrial Financial Ratios, Long-Term Debt--Europe, Middle East, Africa

Median three-year (2008 to 2010) averages

AA A BBB BB B

EBITDA margin (%) 24.9 16.6 15.5 17.6 16.3

Return on capital (%) 20.0 15.3 11.2 9.3 6.7

EBIT interest coverage (x) 15.7 7.0 3.9 3.1 1.0

EBITDA interest coverage (x) 18.5 9.5 5.7 4.6 2.0


Source: 24° August, 2011: 2010 Adjusted Key U.S. An d European Industrial And Utility Financial Ratios, Table 3

EBITDA interest coverage (x) 18.5 9.5 5.7 4.6 2.0

FFO/debt (%) 83.4 45.7 32.3 22.7 10.5

Free oper. cash flow/debt (%) 57.8 23.2 16.0 7.1 1.3

Disc. cash flow/debt (%) 30.5 12.5 8.0 3.4 0.8

Debt/EBITDA (x) 0.9 1.6 2.6 3.2 5.8

Debt/debt plus equity (%) 25.7 33.8 44.4 51.9 75.8

No. of companies 8 55 104 58 55

Corporate: “Issuer Ranking”

• The “Issuer Ranking Report” is produced by industry and ranks all the rated companies from strongest to weakest based on rating andoutlook.

• Companies with the same rating and outlook are further ranked by our opinion of credit


Source: “Issuer Ranking: Global Automakers, Strongest To Weakest 20-Jul-2011

ranked by our opinion of credit quality basedprimarily on our view of business risks for investment-grade companies and primarily on financial risks for speculative-grade companies.

Corporates: Recovery Report for Sub-investment Grad e Issuers• Standard & Poor’s Recovery Analysis provides a benchmark for an investor to use to form an opinion of an asset’s LGD. Together with the ICR, they provide the two elements of expected loss.

• Countries are classified into three categories, placing the most creditor-friendly insolvency regimes in Group A and the least creditor-friendly environments in Group C.

• Our classification determines jurisdiction-specific adjustments to our recovery ratings--namely, the capping of recovery ratings in countries where we expect creditor recoveries to be negatively affected by the particulars of the insolvency regimes.

Company XYZ Hypothetical Data Stressed Valuation


Source: Example of a Source: Example of a Recovery Report

Source: Source: Jurisdiction specific adjustments – June 26, 2009

Simulated default assumptions Simplified waterfall

Year of default 2011 Gross enterprise value at default €120 mil.

2010 EBITDA €35 mil. Administrative costs €8 mil.

EBITDA decline to default 40% Net enterprise value €112 mil.

EBITDA at default €21mil. Priority claims €23 mil.

Implied enterprise value/EBITDA multiple 5.5x Net value available to creditors €89 mil.

LIBOR/margin rise Senior secured debt €121 mil.

Recovery expectation 70%-90%

Secured debt €39 mil.

Recovery expectation 0%-10%

C&G Cross Sector: “Industry Report Card”

• The industry report card is produced for all corporate sectors covered by Standard & Poor's, as well as the sovereign and the public finance sectors. It highlights the key trends of main issuers by industry.


Source: Source: Industry Report Card:Industry Report Card: EMEA Metals And Mining Maintains A Stable Credit EMEA Metals And Mining Maintains A Stable Credit Outlook, But Risks LoomOutlook, But Risks Loom SepSeptember 19tember 19thth 20112011

Source:Source:Industry Report Card:Industry Report Card: The European Real Estate Rating Outlook Is Stable, Despite Rental The European Real Estate Rating Outlook Is Stable, Despite Rental Incomes Lagging Higher Market ValuationsIncomes Lagging Higher Market Valuations 0606--SepSep--20112011

Appendix

Criteria


Criteria

Short-Term Ratings


Methodology: Short-Term/Long-Term Ratings Linkage C riteria For Corporate And Sovereign Issuers, 15-May-2012

Issue Ratings: Potential Outcomes

Issue-Specific Ratings can differ from the corporate credit rating (CCR) → notchingIssue-Specific Ratings can differ from the corporate credit rating (CCR) → notching

Investment grade issuer:

� Junior debt (structurally and/or contractually subordinated) limited to 1 notch downgrade from CCR.

� If priority liabilities > 20% of total assets, lower priority debt rated 1 notch lower.

Speculative grade issuer:

� Issue ratings can differ by up to 3 notches from CCR.

� S&P performs a separate recovery analysis → scenario driven analysis, which helps to estimate recovery prospects of the debt under a hypothetical payment default.

� Notching of the debt is then dependent on recovery expectations.


Standard & Poor’s Recovery Rating * Indicative Recovery Expectations

Loan or Issue Notching from CCR **

1+ Highest expectation of full recovery 100% +3 notches

1 Strong expectation of full recovery 90-100% +2 notches

2 Substantial recovery 70-90% +1 notch

3 Meaningful recovery 50-70% 0 (Un-notched)

4 Average recovery 30-50% 0 (Un-notched)

5 Modest recovery 10-30% -1 notch

6 Negligible recovery 0-10% -2 notch

Nonsovereign Ratings That Exceed EMU Sovereign Ratin gsUnder our criteria, a nonsovereign corporate or government issuer‘s country risk exposure depends on the issuer‘s sector sensitivity to country risk as well as the degree of its exposure to the country.


Source: „Nonsovereign Ratings That Exceed EMU Sovereign Rati ngs: Methodology And Assumptions“, 14 June2011.

The Maximum Rating Differential is a function of our assessment of the issuer ortransaction‘s Country Exposure and the Sovereign Rating range (i.e. InvestmentGrade, High Speculative Grade or Low Speculative Grade).

Copyright © 2011 by Standard & Poor’s Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.

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