MOODYS.COM

24 SEPTEMBER 2012

NEWS & ANALYSIS Corporates 2 » Energizer’s Restructuring Plan Is Credit Positive » Dole Sale Slices the Business but Sweetens the Credit for Lenders » Alpha's Restructuring Plans Help Rationalize Its Business in a

Difficult Market » EPL's $550 Million Acquisition Strains Leverage, a Credit Negative » Lonmin Wage Increase Is Likely to Reduce Profits at South

African Mines » Fortescue Digs Out from Liquidity Challenges with $4.5 Billion

Facility; a Credit Positive » Medco Energi Decision to Develop Libyan Oil Reserves Is

Credit Positive » Thai Tribunal's Dismissal of Arbitration Award to True Corp. Is

Credit Negative

Infrastructure 12 » US Airports Will Be Hurt by American Airlines' Planned Layoffs » Fiscal Reforms Are Credit Negative for Spain's

Electricity Companies

Banks 14 » Basel's New Bank Supervision Principles Are Credit Positive » Brazil's Tax Exemption on Real Estate Backed Securities Is Credit

Positive for Banks » China's Push for Bank Resolution and Deposit Insurance Is Credit

Negative for Small Banks

Sovereigns 17 » European Commission Approval of Czech Government's

Restructuring of Czech Airlines Is Credit Positive

Sub-sovereigns 19 » E-Toll Embargo End Is Credit Positive for South African National

Road Agency

US Public Finance 20 » Innovative Liquidity Structure Is Credit Positive for Variable Rate

Demand Debt Issuers » Alabama Vote Allowing Endowment Draws Is Credit Negative

for State

RATINGS & RESEARCH Rating Changes 24

Last week we downgraded Hrvatska Elektriprivreda, Samchully, Amlin Plc, Amlin Lloyds Syndicate, Amlin AG, Kansai Urban Banking, and Kazkommertsbank, among other rating actions.

Research Highlights 33

Last week we published on global automotive manufacturers, US consumer durables, US life sciences, our US liquidity-stress index, EMEA corporate finance, US banks, Australian banks, California workers’ compensation reforms, US long-term care insurance, Brazilian asset management, Argentina, Mongolia, the European Financial Stability Facility, Malta, Bangladesh, municipalities in coastal Mississippi and Louisiana, US states, US credit card ABS, UK ABS and RMBS, and European REITs and REOCs, among other reports.

RECENTLY IN CREDIT OUTLOOK

» Articles in last Thursday’s Credit Outlook 37 » Go to last Thursday’s Credit Outlook

Discover Weekly Market Outlook, our sister publication containing Moody’s Analytics’ review of market activity, financial predictions, and calendar of economic releases.

NEWS & ANALYSIS Credit implications of current events

2 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Corporates

Energizer’s Restructuring Plan Is Credit Positive

Last Tuesday, Energizer Holdings Inc. (Baa3 negative) announced a restructuring plan that it estimated would save it $175-$200 million per year. The plan is credit positive because it will improve Energizer’s profitability and cash flow at a time when the company is experiencing weakness in its core battery category, relatively high exposure to the sluggish European economy, and intense competition in its personal-care segment.

Energizer plans to rationalize its battery manufacturing facilities, reduce its global workforce, streamline its international operations, and cut procurement and overhead costs. The company, whose brands include Energizer, Eveready, Schick, Playtex, and Hawaiian Tropic, also plans to reinvest about $40 million of the savings in brand building and innovation to drive growth. It will take a one-time, pretax charge of about $218-$250 million for the plan.

The anticipated savings would expand EBIT margins by about 300 basis points from the current 14.2% (including our standard analytical adjustments for operating leases and underfunded pension obligations). Assuming 80% of the $175-$200 million of pretax cost savings falls to the profit line, we estimate a total pretax reduction of 4% in aggregate cost of goods sold as well as selling, general and administrative expenses (including advertising and research and development but excluding non-cash expenses such as depreciation and amortization). These costs were approximately $3.8 billion for the 12 months ended in June. The company expects to complete all of its restructuring actions by September 2014.

Although we expect the plan to improve profitability, Energizer’s ratings outlook remains negative. We expect leverage will remain relatively high over the next 12-18 months given weak operating performance and lower free cash flow. Energizer’s battery sales volumes continue to decline in the US and Europe as consumers switch to rechargeable devices, reduce consumption of traditional batteries, and trade down to less-expensive, lower-performing batteries.

More recent weakness in personal-care revenue growth and profitability is a bigger risk as it relates to intense competition from large competitors such as Procter & Gamble Co. (Aa3 stable) and Kimberly-Clark Corp. (A2 stable), and it will likely continue for the foreseeable future. US births have declined steadily since a peak in 2007, according to the National Center for Health Statistics, which hurts growth prospects for Energizer’s Playtex infant-feeding business. One bright spot, although representing a much smaller percentage of sales, is Energizer’s growing global sun-care brands.

Energizer also said its board had approved significant changes to senior management’s short- and long-term performance incentive targets. The revised programs will shift the emphasis from earnings per share toward metrics, including EBITDA growth, return on invested capital and relative total shareholder return performance against peer companies. Short-term goals will specifically target cost savings and net working capital improvements. We expect these changes to greatly increase the likelihood that the restructuring program will yield positive margin improvements.

Janice Hofferber, CFA Senior Vice President +1.212.553.4493 janice.hofferber@moodys.com

NEWS & ANALYSIS Credit implications of current events

3 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Dole Sale Slices the Business but Sweetens the Credit for Lenders

Last Monday, Dole Food Company (B1 review for upgrade) said it had agreed to sell its worldwide packaged foods business and its Asia fresh produce business to Itochu Corporation (Baa1 stable) of Japan for $1.685 billion in cash. The deal is credit positive because it will generate enough cash to pay almost all of Dole’s existing debt.

The sale will reduce Dole’s debt to around $260 million, according to Dole’s investor presentation, from more than $1.6 billion. We estimate that, at closing, which the companies expect will take place by the end of this year, Dole’s leverage will fall to about 3.0x from over 6.0x today, even after adjusting for remaining pension and lease obligations. For this reason, we put Dole’s ratings on review for upgrade.

Our positive view of the credit effects of the sale assumes that Dole will use most of the proceeds for debt repayment and not distribute cash to shareholders, buy back shares or pursue a large acquisition as a result of this transaction. Dole has historically operated with relatively high leverage, which gives us some caution about its commitment to retain low leverage.

With the sale of the Asia fresh produce business and the higher margin, more stable packaged-foods business, the remaining company will be smaller, less diversified and have more volatile earnings and lower margins. Dole will now operate only in the fresh produce business outside of Asia, which simplifies its operations but also excludes it from fast-growing markets in that region. Without its shelf-stable and frozen packaged foods portfolio, Dole’s product line-up will now include fresh fruits and vegetables and packaged salads, which are the products most susceptible to the vagaries of weather, disease, political disruption and potential product recalls, all of which can cause earnings volatility.

Nonetheless, the sale will result in an improved capital structure, lower corporate expenses and significantly reduced interest costs, allowing more cash to fall to the bottom line and making the deal credit positive.

Linda Montag Senior Vice President +1.212.553.1336 linda.montag@moodys.com

NEWS & ANALYSIS Credit implications of current events

4 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Alpha’s Restructuring Plans Help Rationalize Its Business in a Difficult Market

Last Wednesday, coal producer Alpha Natural Resources Inc. (B1 stable) said it would undertake a strategic repositioning of its operations, reducing its overhead costs by an additional $100 million on top of the $50-60 million of savings it announced in June. The savings would come through 1,200 job cuts and a further 16 million ton reduction in coal production for 2013.The cutbacks are credit positive for Alpha, helping it preserve cash and rationalize its assets. They also demonstrate an operating flexibility necessary to weather the challenging climate facing US coal producers.

Demand for Central Appalachian thermal coal has now entered a period of permanent decline. The utilities sector, which has always relied heavily on cheap, abundant coal, has begun turning elsewhere as the costs of regulation and environmental compliance add up, and natural gas prices become far more competitive.1

Overall, the US coal sector is now trying to adapt to a smaller market for thermal coal, driven by structural changes in the US energy mix. At the same time, demand for metallurgical (met) coal is also softening, reflecting weak global steel demand. Consequently, we anticipate weakness in both the thermal and met coal markets over the next 12 months.

Roughly 90% of the coal-shipment curtailments in Alpha’s new plans will come from its higher-cost thermal operations in Central Appalachia and the Powder River Basin in Wyoming and Montana. The balance of the curtailments will come from Alpha’s lower-quality met coal assets, used primarily for steel production, which have become uneconomical to produce.

Although Alpha’s move will benefit its cash flow and help rationalize its assets, it clearly reflects the US coal sector’s continued loss of market share to competing forms of energy, particularly natural gas. Still, Alpha’s announcement shows that it has some operating flexibility to weather the current climate facing US coal producers. The ability to shut down higher-cost assets while maintaining its lower-cost production will be essential to Alpha’s effort to preserve cash.

Alpha’s new initiatives focus almost entirely on the thermal side. Cutting thermal production will increase Alpha’s exposure to a weakening met coal market, as growth in China softens and steel production declines globally. Recently, prices for hard coking coal have settled at around $170 per metric ton, down from $235 in the first quarter of 2012, and we expect this softness to persist over the next 12 months. GDP growth has begun to slow in the countries that import seaborne coking coal, while new supplies are coming online, particularly from Australia and Mozambique. Even so, the longer-term fundamentals for met coal appear strong. We believe Alpha’s operations will benefit once the demand and pricing for seaborne met coal rebounds.

1 For more about the changing economics of US coal, see US Coal Sees Growing Export Opportunities, But Costs and

Geography Pose Limits, 13 September 2012; US Coal Producers Face Tough 2013 Amid Long-Term Shift in Energy Infrastructure, 22 August 2012; and North American Natural Gas: Low Natural Gas Prices Herald Long-Term Changes In US Energy Infrastructure, 4 April 2012.

Kijana Mack Associate Analyst +1.212.553.3811 kijana.mack@moodys.com

Anna Zubets-Anderson Vice President - Senior Analyst +1.212.553.4617 anna.zubets-anderson@moodys.com

NEWS & ANALYSIS Credit implications of current events

5 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

EPL’s $550 Million Acquisition Strains Leverage, a Credit Negative

EPL Oil & Gas, Inc. (B3 negative) said last Monday it would acquire certain Gulf of Mexico shallow water assets from Hilcorp Energy I LP (Ba2 stable) for $550 million in cash. The acquisition is credit negative for EPL, an independent exploration and production company, leading us to change its rating outlook to negative from stable. For Hilcorp, the deal is credit neutral, pulling the company out of one region and allowing it to expand elsewhere.

Although the new assets would essentially double EPL’s production and proved reserves, the company plans to fund the deal with roughly $490 million of new debt. This will dramatically increase EPL’s debt burden, outweighing the benefits of the expansion of scale. EPL’s negative rating outlook reflects its increased leverage, higher reliance on external funding and acquisition and execution risks.

EPL has only a limited track record since it emerged from bankruptcy in September 2009, as it continues to grow mostly through acquisitions. Nearly three quarters of the company’s small-scale E&P operations, which are primarily in the Gulf of Mexico, concentrate on oil rather than natural gas, which has been a boon during these past two years of historically high crude prices. It also enjoys low risk drilling opportunities and relatively high operating interest in properties that allow flexible capital allocation. Still, EPL faces high plugging and abandonment costs and weak organic reserves growth.

The deal with Hilcorp will nearly double EPL's pro forma debt to average daily production ratio, rising to $31,500 per barrels of oil equivalent per day (boe/d) from $17,200 per boe/d. Similarly, EPL’s debt to proved developed reserves will jump to $12.50/boe from $6.40/boe, based on roughly 10,000 boe/d of production and 36.3 million boe of proved reserves from the acquired assets.

We expect EPL to fund the transaction with $250-$300 million of permanent financing (unsecured notes), and $200-$250 million of revolver borrowings (secured debt), the commitment amount for which was increased to $450 million from $200 million for this acquisition. We expect EPL to have adequate liquidity through 2013, with about $200 million of availability under the $450 million revolver in effect until February 2015. EPL expects to cover its development capex and abandonment costs from internal cash flows through 2013. But any additional acquisitions will likely require further borrowing from the revolver.

Over the longer term, EPL’s increased scale and capital efficiency, along with consistent organic reserve replacement and operational execution, could help the company’s ratings, assuming the company achieves the growth with competitive costs and low financial leverage. But for 2013, we see limited upside in EPL’s credit quality.

Meanwhile, the sale completes Hilcorp’s exit from the Gulf of Mexico, which was once a key part of the E&P company’s portfolio. But the sale reflects Hilcorp’s strategy of value creation through the acquisition, exploitation and monetization its mature producing properties. We expect Hilcorp to deploy the cash proceeds from its deal with EPL into the further development of recently acquired positions in Alaska and the Utica Shale.

Sajjad Alam Analyst +1.212.553.1150 sajjad.alam@moodys.com

Andrew Brooks Vice President - Senior Analyst +1.212.553.1065 andrew.brooks@moodys.com

NEWS & ANALYSIS Credit implications of current events

6 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Lonmin Wage Increase Is Likely to Reduce Profits at South African Mines

Last Tuesday, Lonmin Plc. (unrated), the world’s third-largest platinum producer, reached a wage agreement with workers at its Marikana mine in South Africa, bringing an end to a strike that began in August. The agreement removes the risk of production stoppages at Lonmin, but also sets the tone for more aggressive wage negotiations by other unions in South Africa. The agreement is likely to spur demands for similar wage hikes among other miners, which is credit negative for mining companies with significant exposure to South Africa.

We expect South Africa’s mining companies to continue to face wage increases well above inflation, which is likely to reduce margins, since wages account for the largest share of these companies’ costs. Among the companies that we rate, Anglo American plc (Baa1 stable), Gold Fields Limited (Baa3 positive) and AngloGold Ashanti Limited (Baa2 stable), have the greatest exposure to South Africa in terms of their revenues and operating profits. In 2011, Anglo American generated 49% of its revenues in South Africa, Gold Fields, 47%, and Anglo Gold Ashanti, 39%.

Lonmin’s agreement with miners at Marikina includes a signing bonus of ZAR2,000 (approximately $245) and an average rise in wages of 11%-22% effective 1 October. The increase in wages is well above the headline inflation rate (CPI) in South Africa, which stood at 5% year on year in August.

Mining companies are particularly vulnerable to wage increases because wage costs can in some cases be more than 50% of total costs in their South African operations.2 Furthermore, prolonged strikes resulting from labour disputes lead to reduced production and corresponding declines in cash generation, which, without equivalent reductions in costs, would reduce operating margins and other credit metrics of mining companies most exposed to South Africa.

We think the platinum sector in South Africa is more vulnerable to labour unrest and wage demands than the gold sector, owing to the differences in union composition. Additionally, the more fragmented nature of unions among the platinum companies contributes to the more consolidated negotiation process among gold companies than platinum miners in South Africa.

Among the mining companies that we rate, Anglo American has the largest exposure to the platinum sector in South Africa. In 2011, Anglo American’s platinum business accounted for 17% of the company’s revenues and 12.5% of its EBITDA. However, Anglo American’s exposure to the South African mining industry increases significantly when its other mining operations in the country are taken into account (49% of its revenues and 45% of its operating profits in 2011), leaving it more vulnerable to lost production if labour unrest were to spread and wage demands adversely affected its other South African mining operations beyond platinum.

Gold Fields Limited, the world’s fourth-largest gold producer, has the second-most significant exposure to South Africa. Gold Fields generated 48% of its production and revenues, and 39% of its EBITDA in South Africa for the six months ended 30 June. Gold Fields’ operations were recently disrupted by a strike at its KDC East mine, which has now been resolved, and by an ongoing strike at its KDC West mine, which started on 9 September.

Last Thursday, AngloGold Ashanti Limited, the world’s third-largest gold producer, also faced the start of a strike at its Kopanang operations in South Africa. AngloGold Ashanti generated around 33% of its production, 32% of its revenues and 36% of its EBITDA in South Africa for the six months ended 30 June.

2 For more information, see South African Corporates: Rising Labour and Electricity Costs Pressure Margins, 22 November

2011.

Soummo Mukherjee Vice President - Senior Credit Officer +971.4.237.9520 soummo.mukherjee@moodys.com

NEWS & ANALYSIS Credit implications of current events

7 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

We are also concerned about the risk of contagion to South Africa’s other non-mining sectors that are also highly unionised, as they may now demand similar wage increases leading to further unrest and economic stress.

NEWS & ANALYSIS Credit implications of current events

8 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Fortescue Digs Out from Liquidity Challenges with $4.5 Billion Facility; a Credit Positive

Last Tuesday, Fortescue Metals Group Ltd.

The new facility will substantially alleviate Fortescue’s liquidity pressures, which escalated rapidly owing to the dramatic drop in iron ore price in the past couple of months. The new facility has no financial maintenance covenants. Fortescue’s credit profile was under pressure owing to a dramatic drop in revenues at a time when the company was making heavy capital expenditures and increased debt to substantially expand its production capacity. As shown in Exhibit 1, the new facility matures in 2017 and refinances facilities maturing 2013-21. This new facility will extend Fortescue’s next debt maturity from 2013 by nearly two years to November 2015.

(Ba3 review for downgrade) announced that it had received commitments for a five-year $4.5 billion fully underwritten senior secured credit facility. The proceeds will be used to refinance all existing bank facilities, around $3.6 billion, and provide the company with additional liquidity, a credit positive.

EXHIBIT 1

Fortescue’s Debt Maturity Profile

Source: Company presentations

The new facility will provide around $1 billion of additional liquidity. The company’s liquidity position is also enhanced by previously announced cost-cutting initiatives, including capital expenditure cuts of about $1.6 billion and operating cost cuts of about $300 million.

Iron ore prices have climbed back up to around $110 per tonne after falling dramatically to a low of around $86/tonne in early September, as Exhibit 2 shows. Assuming iron ore prices remain around $100/tonne for the next six to nine months, we expect Fortescue to have sufficient available liquidity to fund ongoing operations and the revised capital expenditure required to reach 115 million tonnes per annum (mtpa) capacity by mid-2013. The company’s liquidity buffer and ability to withstand lower prices will also be affected by its ability to achieve announced cost savings as well as its strategy for potential asset sales.

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Senior unsecured notes Refinanced bank debt New funding facility

Saranga Ranasinghe Associate Analyst +612.9270.8155 saranga.ranasinghe@moodys.com

Matthew Moore Assistant Vice President - Analyst +612.9270.8108 matthew.moore@moodys.com

NEWS & ANALYSIS Credit implications of current events

9 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

EXHIBIT 2

Iron Ore Price

Source: Bloomberg (62% Fe price at the Tianjin port in China)

Although the price trend in iron ore will remain a key focus for Fortescue, its ability to deliver on the expansion project will also be a major credit driver. We expect the company’s financial profile to improve upon successful commissioning of the expansion project, with production capacity growing from 55 mtpa to 115 mtpa by mid-2013.

We expect debt to EBITDA for 2013 to be in the 3.5x-4.0x range. Although this is still higher than the 3.0x reported for the fiscal year ending June 2012, it is based on a price assumption of $100-$110/tonne (based on 62% Fe content), compared to the average price of around $150/tonne (62% Fe content) in the 12 months to June 2012.

$50

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nne

NEWS & ANALYSIS Credit implications of current events

10 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Medco Energi Decision to Develop Libyan Oil Reserves Is Credit Positive

Last Wednesday, Medco Energi Internasional Tbk (P.T.) (B2 stable) said it would launch a joint venture next month with Libya’s state-owned National Oil Corporation (NOC) and the Libyan Investment Authority (LIA) to develop oil reserves in the country’s Area 47 block. The move is credit positive for Medco, one of Indonesia’s largest non-government energy companies, because the Area 47 block is the company’s most important exploration and production investment overseas. Third-party estimates peg the block’s reserves at 352 million barrels of oil equivalent, which would constitute 33% of Medco’s total proved and probable oil and gas reserves.

Medco holds a 25% interest in the joint operating company, while the government of Libya (unrated) has 50% and LIA has 25%. The project, which was originally scheduled to begin in 2010, has faced multiple delays, the latest being in 2011, when widespread civil war forced many companies working in the block to stop their operations in Libya. Medco now expects to begin production by 2015, but has already started pre-engineering work that it expects to complete soon. The company projects peak production of up to 50,000 barrels of oil per day at a cost of around $200 million (net to Medco) over the next four years.

Currently, Medco’s assets are highly concentrated, with over 95% of its proved reserves and all of its production based in Indonesia. Since Medco has already developed more than 60% of its proved reserves, the company has a pressing need to reinvest.

Because this project will add to Medco’s active development and expansion program and will involve additional capex of around $200 million over next four years, its leverage ratios will marginally increase. However, once these projects begin production over the next three to five years, we expect them to broaden the company’s earnings base. Moreover, given that the Area 47 block is Medco’s second-largest field by reserves, the successful execution of this project would boost its credit profile.

Although Medco will benefit by diversifying its operations, the company’s overseas projects entail certain execution risks, as the delays in Libya exemplify. Indeed, political instability remains a concern, underscored by recent violence that led to the death of US embassy personnel in Benghazi. With state-run entities controlling most of Libya’s oil production, it is difficult to quantify the risks arising from a transitional government without a clear policy direction and how those risks would affect companies such as Medco that are investing in the country. However, by moving forward with its project, Medco is expressing its confidence in the government.

We also note that Libya’s oil and gas industry has largely recovered from the disarray that preceded the fall of the Gaddafi regime. According to the Energy Information Administration, crude oil production in Libya recovered to 1.4 million barrels a day in May, after essentially coming to a halt in mid-2011.

Vikas Halan Vice President - Senior Analyst +65.6398.8337 vikas.halan@moodys.com

NEWS & ANALYSIS Credit implications of current events

11 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Thai Tribunal’s Dismissal of Arbitration Award to True Corp. Is Credit Negative

Last Wednesday, Thailand’s Central Administrative Tribunal dismissed True Corporation Public Company Limited’s (B2 stable) petition for a monetary award in a dispute with state-owned TOT Public Company Limited (unrated). The decision is credit negative for True Corp., Thailand’s only integrated telecom operator and the country’s third-largest cellular services provider.

The tribunal dismissed True Corp.’s claim that it was entitled to THB9.2 billion ($307 million) from TOT for providing special services on its network. True Corp. filed the claim with the tribunal in 2006. The benefits date back to August 2002 and with interest now total THB15.6 billion ($520 million). However, because the potential award was never a receivable in the company’s financial statements, dismissal of the claim does not negatively affect its credit metrics. True Corp. said it would consider appealing the ruling to the Supreme Administrative Court, but Thailand’s judicial system suggests this strategy will be a long, drawn-out process.

Although there has been uncertainty about whether True Corp. might receive the award, its additional cash flow would have bolstered the company’s financial cushion at a time when we expect True Corp. to spend THB23-25 billion to expand its 3G networks and services, and to invest substantially in 3G spectrum auctions next month.

The tribunal’s ruling may not be the end of True Group’s disappointments: True Move also has a pending litigation with TOT on payment of access charges and revenue sharing that dates back to November 2007. A ruling against True Move would result in the company bearing additional expenses of THB25.8 billion ($860 million). True Corp. has not provided for this possible liability in its financial statements, and we expect this dispute to remain unresolved in the near term, adding to the uncertainty it faces from the regulatory scrutiny of True Move’s contracts with CAT for the provision of 3G services,3 which it signed in January 2011.

3 See Moody's: Heightened Regulatory Uncertainty Surrounding True's 3G services, 28 March 2012.

Nidhi Dhruv Analyst +65.6398.8315 nidhi.dhruv@moodys.com

NEWS & ANALYSIS Credit implications of current events

12 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Infrastructure

US Airports Will Be Hurt by American Airlines’ Planned Layoffs

Last Wednesday, American Airlines, Inc. (subsidiary of AMR Corporation, ratings withdrawn) said that it had sent layoff warning notices to 11,000 employees, but expects to cut only around 4,400 jobs. The layoff notices signal the bankrupt airline’s plan to reduce its current system-wide flight offerings, which negatively affects the credit of US airports.

The airline said that only around 40% of those receiving notices will lose their jobs, but federal law requires the company to notify anyone whose job may be changed or outsourced. The layoffs, which include unionized flight crews, will inevitably lead to significant reductions in the total number of flights. Fewer flights reduce landing fee payments, directly reducing airport revenue.

We have had a negative outlook on airports since August 2008, largely reflecting shrinking air carrier service. With air carriers seeking improved revenue margins and several merging or ceasing operations since 2008, air carrier seat capacity fell 4.5% and total passengers 5.0% between 2007 and 2011. Fewer passengers reduce airport income from retail concessions, automobile parking, and rental car transactions. In addition, the seat capacity reductions give airlines more power to raise prices, which further impedes demand for air travel, particularly during an economic downturn and tepid recovery.

The recent layoff notices were concentrated in areas near American Airlines’ hub airports, indicating the airline’s intention to further reduce flights throughout its route network: 3,000 layoff notices were distributed at Dallas-Fort Worth International (Dallas-Fort Worth International Airport Board A1 negative), 1,200 at Miami International (County of Miami-Dade Airport Enterprise A2 stable), 1,100 in the New York City area (Port Authority of New York and New Jersey Aa2 negative), and 900 at Chicago (City of Chicago O’Hare Airport Enterprise A2 stable). Approximately 3,000 were also sent to employees at its main maintenance base in Tulsa (Tulsa Airport Improvement Trust A3 negative). Notices were also sent to other locations throughout the network.

Following American Airlines’ Chapter 11 bankruptcy in November 2011, it announced that it expected to lay off approximately 14,000 employees, and nearly 800 employees have already agreed to leave voluntarily in anticipation of the looming layoff notices. Through July, American Airlines carried 2.2% fewer passengers than over the same period in 2011. Since entering bankruptcy, the carrier has trimmed flight offerings at some airports, closed its American Eagle brand regional carrier operations in Los Angeles International Airport (Aa3 stable) and agreed to outsource some of its regional flying to SkyWest (unrated).

In spite of the flight cuts that American Airlines has already implemented, recent reports indicate that additional cuts are imminent, especially if American Airlines and US Airways merge: the two companies have been in merger discussions since August, possibly earlier. We expect a merger to result in further flight reductions as the combined carrier looks to consolidate operations and reduce redundant flights between the two carriers.4

4 See American Airlines Takeover Would Bring Turbulence to US Airports, 23 January 2012.

Kurt J. Krummenacker Vice President - Senior Credit Officer +1.212.553.7207 kurt.krummenacker@moodys.com

NEWS & ANALYSIS Credit implications of current events

13 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Fiscal Reforms Are Credit Negative for Spain’s Electricity Companies

On 14 September, the Spanish government announced its long-awaited draft reforms for the electricity sector, aimed at eliminating the ‘tariff deficit,’ which the government expects to amount to over €5 billion annually. The bill, which calls for new taxes to make up the deficit, will be submitted to Parliament and debated in the weeks ahead, but the governing party’s majority makes its passage with relatively few changes highly likely.

The new taxes in the measures will be credit negative for Spain’s big electricity utilities, Iberdrola S.A. (Baa1 review for downgrade), Enel S.p.A. (Baa1 review for downgrade) and its Spanish-owned subsidiary, (P-2 review for downgrade), Gas Natural SGD, S.A. (Baa2 review for downgrade) as well as Hidroeléctrica del Cantábrico, S.A. (Ba1 negative), a subsidiary of Energias de Portugal, S.A. (Ba1 negative). Abengoa S.A. (B1 stable), a vertically integrated environment and energy group with 13 concentrated solar power plants in Spain will also be negatively affected.

The government hopes to cover more than half the annual deficit through the following taxes:

» Tax on nuclear waste, levied at €2,190 per kg of heavy metal – totalling €270 million in 2013

» Tax on inland hydropower generation, levied at 22% of generation revenue – totalling €304 million in 2013

» ‘Green cent’ tax, levied at €14.97 per ton on coal, €12.00 per ton on fuel oil, €29.15 per 1,000 litres on diesel fuel, and €0.0279 per m3 of natural gas – totalling €1.11 billion in 2013

» A 6% tax on all electricity generation – totalling €1.26 billion in 2013

Iberdrola is the largest nuclear and hydro energy generator in Spain and will be hit hardest by hydro and nuclear taxes, followed by Endesa. But Endesa has the largest portfolio of thermal generation facilities, so it will be hit harder by the green taxes. We expect the companies to ultimately be able to pass through a portion of these taxes, mainly through higher wholesale electricity prices, to end consumers. However, how much they’re able to pass through, and how quickly, will depend on market conditions and the companies’ competitive strategies.

The net pre-tax effect could amount to a few hundred million euros for Iberdrola and Endesa. Gas Natural and Energias de Portugal are less exposed. Unlike the electric utilities, Abengoa is likely to have to absorb all of the generation tax; the premium paid to thermo-solar electricity produced using gas will also be eliminated.

In addition, the government said it would assume a further €2.5 billion of the deficit, by taking €2.1 billion of past tariff deficit annuities and interest onto the state budget plus applying proceeds of €450 million from the auction of carbon dioxide rights.

The move should create more regulatory certainty as the measures aim to eliminate the tariff deficit in the future. Past deficits have been funded by the electricity companies until they were able to securitise tranches through a dedicated government-backed fund, but not all have yet been securitised.

Helen Francis Vice President - Senior Credit Officer +44.20.7772.5422 helen.francis@moodys.com

Kathrin Heitmann Analyst +49.69.70730.789 kathrin.heitmann@moodys.com

NEWS & ANALYSIS Credit implications of current events

14 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Banks

Basel’s New Bank Supervision Principles Are Credit Positive

On 14 September, bank regulators from more than 100 countries endorsed the Basel Committee on Banking Supervision’s new core principles for effective bank supervision.5 The new rules will serve as a benchmark for bank supervision globally. International organizations such as the International Monetary Fund (IMF) and the World Bank will monitor compliance through their regular assessments of national regulators. The implementation of these standards will be credit positive for all banks globally, and contribute to ensuring their safety and soundness.

The updated principles address several weaknesses that the market turmoil since 2007 revealed in the former principles. A key shortcoming that became apparent during the financial crisis was that supervision was often too focused on individual entities (micro) and not focused enough on systemic risks (macro). To correct this, the revised principles emphasize that regulators need to consider both macro- and micro-prudential perspectives in their supervision. (Regulators and central banks in many countries have beefed up their macro-prudential supervision since 2007, including in the EU with the establishment of the European Systemic Risk Board.)

Another element of the new principles calls on regulators to broaden their scope to capture topics such as corporate governance, disclosure and transparency. The financial crisis showed that shortcomings in these areas can cause banks to fail or require support.

In our view, supervision is a critical element in the broader effort to make banks safer. The principles to which bank supervisors aspire determine the effectiveness of bank oversight. Stricter capital and liquidity rules (as reflected in the Basel 3 framework) are important, but without effective supervision, they are insufficient. Other important elements of the new principles are the resources that regulators command and the institutional structure of supervision. (The European Commission recently proposed giving the European Central Bank supervisory responsibility for all euro area banks, a potentially positive step since a single European supervisory mechanism is likely to promote a level regulatory playing field, convergence of standards, and supervisory independence.)6

The Basel Committee’s revised core principles will be useful for jurisdictions to self-assess their systems. The principles will serve as a benchmark in publicly-disclosed compliance assessments by the IMF and the World Bank as part of their Financial Sector Assessment Program.7

The IMF reports include an evaluation of national regulators’ compliance with core supervisory principles. This public monitoring creates an incentive for countries to use the updated principles to improve their supervisory practices. Therefore, Friday’s endorsement of the principles by regulators and central banks from more than 100 countries will have a positive effect, even though full implementation will require time and commitment.

5 See Basel Committee’s Core Principles for Effective Banking Supervision, September 2012. 6 See Bank Supervision Proposals Would Be Credit Positive for Weaker Euro Area Governments, 17 September 2012 and

European Commission: Commission Proposes a Package for Banking Supervision in the Eurozone – Frequently Asked Questions, 12 September 2012.

7 The IMF’s Financial Sector Assessment Program is a comprehensive and in-depth analysis of a country’s financial sector.

Alain Laurin Senior Vice President +33.1.5330.1059 alain.laurin@moodys.com

Tobias Moerschen, CFA Vice President - Research +1.212.553.2891 tobias.moerschen@moodys.com

NEWS & ANALYSIS Credit implications of current events

15 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Brazil’s Tax Exemption on Real Estate Backed Securities Is Credit Positive for Banks

Last Tuesday, the Brazilian government announced that it would extend to foreign investors a tax exemption on real estate asset-backed securities (known as Certificado de Crédito Imobiliário, or CRI) that is currently available only to domestic investors.

The measure is credit positive for banks operating in project finance or pursuing a greater share of infrastructure finance because it will enable them to originate more long-term commercial real estate loans that they can sell to securitization companies. Those asset securitizers can then issue and sell CRIs to foreign investors. In addition, selling long-term loans allows banks to avoid sizable tenure mismatches between their assets and liabilities.

Among the banks we expect to benefit are Banco Bradesco S.A. (A3 positive; C-/baa1 positive),8 Itaú Unibanco S.A. (A3 positive; C-/baa1 positive), Banco Santander (Brasil) S.A. (Baa1 stable; C-/baa2 stable) and HSBC Bank Brasil S.A. (A1 stable; C-/baa2 stable).

CRIs are fixed-income securities backed by receivables originated from real estate financing. Real estate securitization companies acquire and securitize real estate loans and issue and place CRIs in the financial market. Among the assets used to structure CRIs are residential mortgages and loans to finance the construction of infrastructure-related projects.

The government’s move last week aligns the tax treatment of CRIs with that of infrastructure debentures and government bonds in an effort to increase long-term funding alternatives in Brazil. The tax exemption for foreign investors does not include CRIs backed by residential mortgage loans, only those backed by loans to infrastructure projects.

The measure allows banks to increase their participation in projects that historically have been financed by the government’s development bank, Banco Nacional de Desenvolvimento Econômico e Social - BNDES (A3 stable),9 the country’s primary provider of long-term funding. Despite government efforts to encourage the participation of privately owned banks in long-term financing operations, banks have been reluctant. The four aforementioned banks’ lending to infrastructure projects in 2011 ranged between BRL10 billion and BRL20 billion, compared with BRL55.9 billion for BNDES.

Currently, there is strong demand for long-term financing in Brazil to service the large pipeline of projects supporting sizable infrastructure programs associated with the World Cup and the Olympics. The government has launched stimulus programs focused on modernizing highways and railways, and we expect the country to invest as much as BRL922 billion through 2016 updating airports, ports, water and sewage treatment, power generation and petroleum exploration.

8 The bank ratings shown in this report are the bank’s deposit rating, its standalone bank financial strength rating/baseline

credit assessment and the corresponding rating outlooks. 9 Long-term domestic issuer rating.

Alexandre Albuquerque Assistant Vice President - Analyst +55.11.3043.7356 alexandre.albuquerque@moodys.com

NEWS & ANALYSIS Credit implications of current events

16 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

China’s Push for Bank Resolution and Deposit Insurance Is Credit Negative for Small Banks

Last Monday, China’s State Council announced that it had approved a plan that outlines the country’s financial industry development during the 12th Five-Year Plan (2011-15), which serves as a guide for future legislation and policy. Although the plan reiterates the need to deepen capital market development and financial reform, it now includes calls for establishing a deposit insurance system and bankruptcy mechanism as part of a framework to facilitate the orderly wind downs of failing financial institutions. For small Chinese banks, these new elements are credit negative because they weaken the government’s incentive to provide support to them.

Small banks are deposit-taking credit institutions that have limited geographic exposure and networks in China. They include city commercial banks, rural credit cooperatives, rural commercial banks, and rural cooperative banks. At the end of 2011, China had 2,811 small banks, accounting for 20% of all banking system assets. By comparison, China’s five large commercial banks and 12 joint-stock commercial banks together hold 64% of total bank assets.

The five-year plan suggests that China is moving closer to implementing a formal bank resolution regime. But while these measures would protect the depositors covered by the insurance system and contribute to the public confidence in, and the stability of, the banking system, the measures would be credit negative for bondholders and uninsured depositors in the following ways:

» They will weaken the government’s incentive to provide support, especially to small banks. Insurance protection for retail depositors and a clear exit framework will reduce the social costs of bank failures and the potential for contagion. As a result, there will be less need for the government to provide blanket protection and guarantees to support non-viable banks. Such government support would remain more likely for those banks whose failure would cause systemic risk.

» They facilitate faster implementation of market reforms. With a formal bank resolution regime in place, we expect the Chinese government will be emboldened to pursue faster market reforms, such as interest rate liberalization and disintermediation. Such measures would raise competitive pressure on small banks relative to large banks because small banks generally lack deposit and loan pricing power, thereby putting them at risk of net interest margin compression.

» They could result in small banks paying higher deposit premiums for perceived deposit risks. Although a deposit insurance system would bolster confidence among depositors covered by the insurance, the effect of deposit insurance and a formal bank resolution regime could be the reduced expectation of a blanket or unconditional bailout at times of stress. The perception of greater risk could lead to increasing risk discrimination among depositors toward smaller banks.

Although the 11th Five-Year Plan also mentioned implementing a deposit insurance system and establishing an exit process for financial institutions, the 12th Five-Year Plan contains more operational detail that makes these efforts more likely to come to fruition in this planning period. Specifically, the plan highlights the need to accelerate the legislation for a deposit insurance system and to implement it at the proper time. It also mentions establishing a bankruptcy mechanism, which was not specified in the previous plan.

Those plans echo the People’s Bank of China’s (PBoC) July China Financial Stability Report , which suggested that China is approaching the appropriate moment to introduce deposit insurance, and in an August speech, Xiaochuan Zhou, the PBoC’s governor, mentioned the need to accelerate the establishment of deposit insurance. Therefore, we expect the deposit insurance system to be in place within the next year or two.

Katie Chen Associate Analyst +86.10.6319.6569 katie.chen@moodys.com

NEWS & ANALYSIS Credit implications of current events

17 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Sovereigns

European Commission Approval of Czech Government’s Restructuring of Czech Airlines Is Credit Positive

Last Wednesday, the European Commission, after an in-depth investigation, concluded that the Czech Republic’s (A1 stable) CZK2.5 billion (0.1% of GDP) of restructuring aid to state-owned air carrier Czech Airlines (CSA, unrated) is in line with European Union state aid rules. The EC found that the restructuring plan adequately addresses CSA’s financial problems and paves the way for its return to profitability and an eventual sale of the airline. The conclusion is credit positive for the sovereign because the restructuring will decrease the airline’s reliance on government funds to ensure its continued operations.

Czech authorities announced in May 2010 that they intended to restructure CSA with the help of state aid, and a month later executed a CZK2.5 billion (€100 million) debt-to-equity swap of a loan from state-owned company Osinek. The EC in February 2011 opened an investigation into the restructuring plan, citing its doubts about whether the plan was suitable to restore CSA’s viability and to offset worries about potential distortions of competition brought about by the aid.

The EC’s investigation found that the restructuring plan, covering a period of five years, was based on realistic assumptions and will enable CSA to become viable again within a reasonable timeframe. The plan includes capacity reduction, the sale of planes and the surrender of landing slots at European airports, all of which underpinned the EC’s endorsement and ruled out anti-competitive concerns. Moreover, by selling subsidiaries, aircraft and other assets and securing a private bank loan for an aircraft lease, Czech Airlines will contribute to the costs of its restructuring, thereby limiting the drain on the government’s fiscal accounts.

As part of a government plan to consolidate public air transport companies, CSA is now a part of Cesky Aeroholding, which will help the government keep better track of financial results and contingent liabilities as it moves forward with its plan to sell the airline. The restructuring plan sets a path towards sustainable profitability and will help entice potential buyers as the company has had poor results in recent years, as the exhibit shows.

Czech Airlines’ Financial Performance for 2005-10, CZK billions

2005 2006 2007 2008 2009 2010 2005-10 Total

Sales 21.5 24.0 24.0 23.2 20.4 16.9 130.0

Cost of sales -18.3 -18.6 -18.7 -18.7 -18.1 -14.3 -106.7

Gross margin 3.2 5.4 5.4 4.5 2.2 2.6 23.3

Personnel cost -4.1 -4.5 -4.8 -4.8 -4.9 -3.9 -27.0

Disposals of LT assets 0.2 0.2 0.6 1.4 0.4 0.8 3.5

Other (depreciation, etc) 0.3 -1.3 -0.7 -0.3 -1.3 0.2 -3.2

Operating profit -0.5 -0.2 0.5 0.7 -3.5 -0.3 -3.4

Source: Czech Airlines annual reports 2005-10.

With the EC’s green light, successful implementation of the restructuring plan will eliminate the need for capital transfers from the government’s fiscal accounts and make the airline an attractive asset for investors. The government would benefit from the sale of the airline as the fresh revenue would come

Jaime Reusche Assistant Vice President - Analyst +1.212.553.0358 jaime.reusche@moodys.com

NEWS & ANALYSIS Credit implications of current events

18 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

at a time when consolidating its fiscal position is critical for preserving the positive investor sentiment that grants the sovereign very low funding costs, a key credit strength.

NEWS & ANALYSIS Credit implications of current events

19 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Sub-sovereigns

E-Toll Embargo End Is Credit Positive for South African National Road Agency

Last Thursday, the South African Constitutional Court, the country’s highest court, overturned a lower court’s April order blocking the implementation of electronic tolling on the Gauteng Freeway Improvement Project (GFIP), the country’s largest toll road. The ruling is credit positive for the South African National Road Agency Ltd. (SANRAL, Baa2 negative), the toll road’s operator, because it can begin collecting e-toll revenues that are key to servicing the ZAR20 billion ($2.4 billion) of debt used to build the road. However, the ruling does not entirely resolve the e-toll saga, as GFIP awaits a full review by the courts in November.

The e-toll on GFIP has generated extensive debate in the country. Public opposition prompted the national government to reduce toll road tariffs and postpone June 2011 implementation of e-toll collections. As of April 2012, delayed implementation and lower-than-anticipated tolls resulted in SANRAL reporting a revenue loss of about ZAR2.7 billion ($325 million), which is equal to 40% of its 2012 annual revenue. The South African government responded by providing SANRAL ZAR5.8 billion ($745 million) to compensate for the lack of e-toll revenue and to defray operating costs, including debt service payments on the GFIP debt, a large proportion of which the South African government (A3 negative) guarantees.

The GFIP is responsible for most of the rapid surge in SANRAL’s debt, which rose to ZAR37.5 billion ($4.5 billion) as of August 2012, or a high 5x its 2012 annual revenues, from ZAR6.2 billion ($747 million) in March 2007. Implementation of e-tolls will alleviate SANRAL’s cash tension and reduce its dependence on government funds. Negative pressure on SANRAL’s liquidity and the risk that tolls would not be allowed were some of the factors in our May downgrade of SANRAL’s rating to Baa2 from Baa1. At the end of June, SANRAL’s cash reserves and governments funds totaling ZAR7.1 billion ($855 million) were sufficient to cover operating expenditures and short-term obligations, including debt service, over the next 16 months. SANRAL indicated that it would start collecting e-tolls in approximately six weeks.

The favorable court ruling does not entirely resolve SANRAL’s e-toll matter. The court kept a requirement that the GFIP receive a full review by the high court, which we expect will begin at the end of November. An unfavorable ruling in that review would negatively affect SANRAL’s cash flows and threaten its business model. Furthermore, operational risks associated with the e-toll collection remain. In particular, we note that the new legislation aimed at augmenting SANRAL’s power to collect e-toll fees from drivers who don’t pay them has not yet been approved by Parliament.

Kenneth Morare Analyst +27.11.217.5478 kenneth.morare@moodys.com

Francesco Soldi Vice President - Senior Analyst +39.02.9148.1149 francesco.soldi@moodys.com

NEWS & ANALYSIS Credit implications of current events

20 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

US Public Finance

Innovative Liquidity Structure Is Credit Positive for Variable Rate Demand Debt Issuers

Last Thursday, the Municipal Improvement Corporation of Los Angeles successfully distributed $130 million callable municipal commercial paper notes supported by a letter of credit structured to avoid the onerous Basel III liquidity coverage ratio requirement that becomes effective in 2015. This approach to liquidity support is credit positive for issuers in the $280 billion market for variable rate demand bonds (VRDBs) and similar municipal instruments that rely on bank liquidity support.

The structure, also used by North Texas Tollway Authority for a $178 million VRDB in August, may reduce the cost and increase the availability of credit and liquidity support facilities for commercial paper and VRDBs once the Basel III liquidity coverage ratio requirement is implemented in 2015.

VRDBs are long-term obligations that are puttable at par either weekly or daily. On put dates, the remarketing agent sets the VRDB coupon at a level it expects will allow sale at par. Investors, mostly money market funds, purchase VRDBs based largely on the support provider’s commitment to provide liquidity on a timely basis by purchasing un-remarketed bonds.

Starting in 2015, the Basel III liquidity coverage ratio will require that banks hold highly liquid assets equal to 100% of liquidity commitments that can be drawn within 30 days, increasing the bank’s costs. We expect that banks will try to pass on these costs to municipal VRDB issuers that rely on their liquidity facilities, and if they cannot pass them, to restrict the availability of credit and liquidity support they provide to the VRDB market.

EXHIBIT 1

Liquidity Coverage Ratio Requirement

Highly Liquid Assets > 1.00 Potential Draws on Liquidity Next 30 Days

Source: Moody’s

The new letter-of-credit-backed callable commercial paper structure keeps the support provider’s commitment to fund outside of the 30-day period and therefore exempt from the liquidity coverage calculation. The support provider is required to purchase any commercial paper or bond that is not rolled over at maturity or successfully remarketed, as applicable, at the end of the interest rate period. Starting 30 days before the end of the interest rate period, the support provider’s purchase commitment will be included in the liquidity coverage ratio (see Exhibit 2).

To avoid inclusion in the liquidity coverage ratio, the callable commercial paper structure gives the issuer the right to trigger redemption or a mandatory tender 31 or more days before the end of the interest rate period. Such redemption or mandatory tender will be funded only from proceeds of remarketing or rolling over the commercial paper or VRDBs.

If the remarketing or roll succeeds, the support provider’s liquidity commitment stays outside the 30-day window and avoids inclusion in the liquidity coverage ratio. If it fails for any reason, the liquidity commitment will be included in the ratio. In the case of a failed roll, the municipal issuer’s fee to the bank for its liquidity commitment will increase to compensate the bank’s cost of offsetting its

Coby Kutcher Associate Analyst +1.212.553.3884 coby.kutcher@moodys.com

Thomas Jacobs Vice President - Senior Credit Officer +1.212.553.0131 thomas.jacobs@moodys.com

NEWS & ANALYSIS Credit implications of current events

21 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

commitment with highly liquid assets. If all works as expected, the commercial paper or VRDBs in the Basel III mode will be remarketed before the support provider’s commitment to purchase them has to be included in the liquidity coverage ratio, as shown in Exhibit 2.

EXHIBIT 2

Transaction Flow Chart

Source: Moody’s

VRDO Remarketing Date or CP Issue Date

31 Days Before Mandatory Tender or Maturity Date

Initial Mandatory Tender or Maturity Date

31 Days Before Mandatory Tender or Maturity

Second Mandatory Tender or Maturity Date

31 Days Before Mandatory Tender or Maturity

Third Mandatory Tender or Maturity Date

Distribute to Investors

Issuer Directed Tender & Remarketing

Issuer Directed Tender & Remarketing

Issuer Directed Tender & Remarketing

As long as remarketings upon issuer directed tenders succeed, debt stays out of 30-day "red zone" and support provider's commitment to fund stays out of liquidity coverage ratio.

NEWS & ANALYSIS Credit implications of current events

22 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Alabama Vote Allowing Endowment Draws Is Credit Negative for State

Last Tuesday, voters in Alabama (Aa1 stable) approved an amendment to the state’s constitution that allows the state to draw from an endowment to provide healthcare for the needy and keep correctional facilities running. Although the amendment averts the need for broad service cuts, it also means the state plans to rely on non-recurring revenue for operations, a credit negative.

Voters approved withdrawals totaling $437 million from the $2.3 billion Alabama Trust Fund (ATF), which the state created in 1985 to invest oil and gas revenues from lease payments from offshore oil and gas producers. The amendment, which goes into effect on 1 October, the start of the state’s fiscal year, draws $146 million in each of the next three years to support the General Fund’s expenditures, or about 8.6% of next year’s $1.7 billion total.

Without passage of the amendment, the state would have faced across-the-board program cuts and employee layoffs, according to Governor Robert Bentley, who has said the state will reimburse the ATF for the draws, even though the amendment doesn’t require repayment. The state’s planned multi-year use of those funds signals that its structural budget imbalance will make it difficult to implement the intended repayment. Inability to adopt a plan to return to structurally balanced General Fund operations could negatively affect the state’s rating.

Liquidating investments to subsidize the state General Fund’s ongoing needs extends a trend of declines in the value of the ATF’s invested assets, which peaked at about $3.3 billion in fiscal 2007 (see exhibit). Reductions in ATF-invested assets limit the fund’s ability to generate income. Managed fund assets have returned an average of about 5% over the past five years, according to the state treasurer’s office. Interest and dividend income from the ATF’s investments is one of the largest single revenue sources of the state’s General Fund. However, this income source has waned in recent years, falling to $84 million in fiscal 2011 from a peak of $113 million in fiscal 2007.

Alabama Trust Fund’s Market Value of Investments

Source: Alabama State Treasurer

Invested assets have been depleted by about $600 million by prior-year borrowings from “rainy day” accounts that the state carved out of the fund, one for the General Fund and the other for the state’s Education Trust Fund (ETF), under prior constitutional amendments. The state in 2009 drew $437.4 million from the ETF rainy day account in the trust fund. The constitutional amendment allowing this borrowing requires repayment of the ETF borrowing six years from the time the loan began. The state’s General Fund owes about $162 million, which must be repaid within 10 years.

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

2004

2005

2006

2007

2008

2009

2010

2011

2012

(P)

$ bi

llion

s

Ted Hampton Vice President - Senior Analyst +1.212.553.2741 ted.hampton@moodys.com

NEWS & ANALYSIS Credit implications of current events

23 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Another reason for the declines in ATF invested assets in recent years was a 2000 amendment that allowed the state to transfer amounts from the fund equal to 75% of its realized and unrealized gains on investments other than bonds. In fiscal 2012, under this provision, the state withdrew $266 million from the fund, representing gains attributable to prior fiscal years that had not been properly calculated.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

24 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Corporates

Dole Food Company, Inc. Review for Upgrade

4 May ‘12 18 Sep ‘12

Senior Unsecured Rating B1 B1

Outlook Developing Review for Upgrade

The review follows the announcement that Dole has reached an agreement with ITOCHU Corporation of Japan (Baa1 stable) to sell its worldwide packaged foods and its Asia fresh produce business for $1.685 billion in cash. Net proceeds will be used to repay debt, for restructuring and for other corporate purposes.

Emergency Medical Services Corporatio n Outlook Change

5 Apr ‘11 20 Sep ‘12

Senior Unsecured Rating B2 B2

Outlook Stable Negative

The outlook change reflects the company's move toward a more aggressive financial policy as shown in a $428 million dividend payment at the holding company level. We had expected EMSC to continue to deleverage.

Harley-Davidson Financial Services, Inc . Outlook Change

3 Mar ‘11 17 Sep ‘12

Senior Unsecured Rating Baa1 Baa1

Outlook Stable Positive

The positive outlook reflects our expectation that Harley-Davidson’s restructuring initiatives, combined with the benefits from efforts to improve operating efficiencies, will materially reduce its vulnerability to cyclical downturns. Should Harley-Davidson remain on track with the improvements it is targeting into early 2013, its long-term rating could be raised.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

25 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Starwood Hotels & Resorts Worldwide Inc. Review for Upgrade

13 Mar ‘12 19 Sep ‘12

Senior Unsecured Rating Baa3 Baa3

Outlook Stable Review for Upgrade

The review for upgrade acknowledges Starwood's material reduction in outstanding debt coupled with the steady improvement in operating metrics -- specifically occupancy, ADR, and RevPAR -- that has driven stronger earnings, cash flows, and credit metrics.

Tyco International Finance S.A. Confirmation

19 Sep ‘11 17 Sep ‘12

Senior Unsecured Rating A3 A3 (confirmed)

Outlook Review for Downgrade Stable

The action concludes the review for possible downgrade that we initiated in September 2011 upon Tyco's announcement of plans to separate into three entities. The confirmation reflects the still sizable revenues, earnings, cash flows and substantially lower debt level of the remaining commercial fire and security business of Tyco after the distribution to shareholders of 100% of The ADT Corporation, Tyco's North American home and small business security operations, and Tyco Flow Control International Ltd, its heat management and water transmission unit.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

26 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Infrastructure

Access Justice Durham Ltd. (AJD ) Confirmation

1 May ‘12 20 September ‘12

Senior Secured Rating A2 A2

Outlook Stable Stable

This rating action concludes the review for downgrade initiated on 1 May 2012. The confirmation results from AJD's issue of additional common equity in order to fully fund the debt service reserve account, thus removing the exposure to a weakening bank providing the debt service reserve account letter of credit. The trust indenture documenting AJD's bond issue gives the choice to AJD to either fund the debt service reserve account with cash or to meet that requirement by way of a debt service reserve letter of credit.

Empresa Electrica de Guatamala, S.A. Outlook Change

13 Dec ‘10 17 September ‘12

Senior Unsecured Rating/CFR Ba3 Ba3

Outlook Stable Positive

The change in outlook is because we expect that EEGSA will successfully refinance around $85 million of the short-term debt incurred this year with long-term bank loans. EEGSA borrowed the balance (approximately $30 million) under its new five-year $50 million committed credit facility that expires in February 2017, which we understand EEGSA will repay. The rating action also considers the successful execution of this credit facility because it enhances EEGSA's liquidity profile, and its ability to bridge its working capital requirements that result mainly from some delays in recovering power procurement costs.

Hrvatska Elektriprivreda d.d. (HEP) Downgrade

7 Dec ‘11 21 September ‘12

CFR/PDR Ba1 Ba2

Outlook Stable Negative

The downgrade reflects the significant pressure on HEP's liquidity arising from the high proportion of short-term debt in the company's total debt burden, the demanding maturity profile of its long-term debt and its need for significant new financing to cover its sizeable investment programme. We maintain the negative outlook on HEP's ratings, reflecting the negative rating outlook on the Baa3 local- and foreign-currency government bond ratings of the Government of Croatia, which owns 100% of the company.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

27 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Lakeview Light and Power & LL&P Wind Energy Outlook Change

2 Mar ‘11 19 September ‘12

Debt Rating Baa2 Baa2

Outlook Negative Stable

The affirmation and outlook change reflect the large 11% and 19% rate increases by Lakeview for 2012 and 2011, respectively, which should allow the utility to materially improve its liquidity over time while ensuring approximately 1.2x-1.4x consolidated debt service coverage depending on wind energy production and power prices. Lakeview's rating is also supported by its unregulated rate setting ability, limited customer dominance and resale of most of the power derived from the White Creek Wind Project project under long-term contracts.

Samchully Company Limited Downgrade

21 Dec ‘11 19 September ‘12

Issuer Rating A2 A3

Outlook Stable Stable

The downgrade primarily reflects the significant contingent liabilities arising from Samchully's investment as the largest sponsor of an 835MW liquefied natural gas power project in Korea, which has just received regulatory approval. The power project also carries execution risks during the construction phase, which is likely to last for a few years. We expect the debt-funded investment to put pressure on Samchully's credit profile over the next one-to-two years. The company's financial metrics have already weakened owing to its ongoing high capital expenditures and investment to expand its energy-related businesses.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

28 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Financial Institutions

Amlin Plc

Downgrade 7 Sep ‘11 18 Sep ‘12

Subordinated Debt Baa2 Negative Baa3 Stable

Amlin Lloyds Syndicate 2001

Insurance Financial Strength Rating A1 Negative A2 Stable

Amlin AG

Insurance Financial Strength Rating A2 Stable A2 Stable

The rating downgrades follow the deterioration in Amlin’s key financial metrics during 2011 driven by a significant reduction in equity, potential constraints on future capital growth and the bank’s still-high risk appetite. As a result, we view Amlin's overall credit quality to be more appropriately positioned at A2 for insurance financial strength.

Commerce Bancshares, Inc Review for Downgrade

30 Nov ‘10 20 Sep ‘12

Short-Term Rating Prime-1 Prime-1 (Stable)

Commerce Bank

Long-Term Deposits Aa2 Aa2

Short-Term Rating Prime-1 Prime-1 (Stable)

Standalone Bank Financial Strength / Baseline Credit Assessment B+ / aa2 B+ / aa2

Outlook Stable Review for Downgrade

Commerce operates a high-performing direct commercial and retail banking model and enjoys above-average franchise diversity. Nonetheless, the review reflects our opinion that the bank faces the same risks as its peers in the currently challenging domestic operating environment. In particular, the review will look at how protracted low interest rates could pressure the bank’s net interest margin, which accounts for more than half its revenue base.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

29 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

DriveTime Automotive Group & DT Acceptance Corp Review for Downgrade

20 May ‘10 20 Sep ‘12

Corporate Family Rating B3 B3

Senior Secured Notes B3 B3

Outlook Stable Review for Downgrade

The rating action reflects uncertainty regarding DriveTime’s post-tender senior notes terms and protections provided to noteholders who choose not to participate in the tender offer. The review will focus on the progress of the proposed tender offer as well as the ultimate senior notes terms for noteholders who do not tender.

Financiera Bepensa SA de CV SOFOM ENR Mixed Action

15 Nov ‘11 20 Sep ‘12

Local Currency Issuer Rating Ba3 / Not Prime B2 / Not Prime

National Scale Issuer Rating A3.mx / MX-2 Baa3.mx / MX-3

Baseline Credit Assessment b3 b2

Outlook Stable Stable

In raising Financiera Bepensa's standalone baseline credit assessment, we took into account the growing diversification of the bank’s business away from operations with Grupo Bepensa, and its comfortable capitalization, which has supported the company's recent robust expansion. Though still the captive financial arm of Grupo Bepensa and its affiliates, Financiera Bepensa has been able to expand geographically and its business and customer relationships now go beyond those derived from the conglomerate.

The downgrade of Financiera Bepensa's issuer ratings reflects the fact that we no longer incorporate our assessment of the probability of parental support into those ratings.

Kansai Urban Banking Corporation Downgrade

24 Aug ‘11 19 Sep ‘12

Long-Term Deposits A2 A3

Short-Term Deposits Prime-1 Prime-2

Standalone Bank Financial Strength / Baseline Credit Assessment D / ba2 D- / ba3

Outlook Negative Stable

The downgrade is based on our view that Kansai’s earnings will remain constrained and that the bank will not be able to improve profitability to the higher levels achieved prior to the global financial crisis, as anticipated. As a result, internal capital generation will be weak and the bank’s current low Tier 1 capital adequacy ratio is unlikely to improve.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

30 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Kazkommertsbank Downgrade

17 May ‘11 18 Sep ‘12

Local & Foreign Currency Deposits Ba3 Negative B2 Negative

Foreign Currency Senior unsecured Debt B2 Negative Caa1 Negative

Standalone Bank Financial Strength / Baseline Credit Assessment E+ / b2 Stable E / caa1 Stable

The downgrade reflects the sharp increase in negative pressures on Kazkommertsbank’s credit profile, driven by weakening liquidity, ongoing asset quality deterioration and eroding profitability. The bank’s profitability is likely to remain depressed in the medium term, given declining earnings and the significant levels of loan-loss provisions that still need to be recognized.

Lloyds TSB Bank Plc (Uruguay) Review for Downgrade

1 Aug ‘12 20 Sep ‘12

Global Local Currency Deposits Baa1 / Prime-2 Baa1 / Prime-2

Global Foreign Currency Deposits Baa3 / Prime-3 Baa3 / Prime-3

Outlook Stable Review for Downgrade

Banque Heritage (Uruguay) SA Outlook to Negative

27 Apr ‘12 20 Sep ‘12

Global Local Currency Deposits B3 / Not Prime B3 / Not Prime

Global Foreign Currency Deposits B3 / Not Prime B3 / Not Prime

Standalone Bank Financial Strength / Baseline Credit Assessment E+ / b3 E+ / b3

Outlook Stable Negative

The review for downgrade of Lloyds TSB Bank is based on the announced sale of the bank to Heritage Uruguay, which reduces the quality of parental support. The change in outlook on Heritage Uruguay's ratings reflects the potential negative effects on the bank's financial performance of its acquisition of a bank more than twice its size. Heritage Uruguay's modest operation has posted losses for the past three years mainly as a result of high start-up costs, and as such the bank will be challenged to absorb the costs related to the integration of Lloyds' employees and business operations.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

31 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

US Bancorp Review for Downgrade

1 Nov ‘10 20 Sep ‘12

Senior Debt Aa3 Aa3

US Bank National Association

Long-Term Deposits Aa2 Aa2

Standalone Bank Financial Strength / Baseline Credit Assessment B+ / aa2 B+ / aa2

Outlook Negative Review for Downgrade

US Bancorp is a strong, diverse and well-managed bank that generated positive earnings with comparatively little volatility during the recent downturn, which gave it a significant competitive advantage. The rating review will consider whether the bank can sustain its superior performance over the long term in light of increasing competition, now that its peers have for the most part returned to health and are seeking growth. Although US Bancorp's recent investments have thus far supported its earnings growth, some of its expanded businesses, like mortgage banking, expose it to incremental volatility.

RATING CHANGES Significant rating actions taken the week ending 21 September 2012

32 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Sovereigns

Argentina Outlook Change

14 August ‘08 17 September ‘12

Gov Currency Rating B3 B3

Foreign Currency Deposit Ceiling Caa1 Caa1

Foreign Currency Bond Ceiling B2 B2

Local Currency Deposit Ceiling Ba3 Ba3

Local Currency Bond Ceiling Ba3 Ba3

Outlook Stable Negative

Factors for the change include the continued haphazard policy environment, ongoing concerns about the quality and reliability of official data reporting, and no signs of an eventual resolution to Argentina’s debt arrears, raising fundamental questions about the sovereign's willingness to pay. The uncertain policy picture was evidenced most recently in the nationalization without compensation of YPF, Argentina's largest oil company, and import controls that have stalled economic growth.

Structured Finance

CitiMortgage's Servicer Quality Assessment Lowered to SQ2+ from SQ1-

We lowered our assessment of CitiMortgage as a primary servicer of prime mortgage loans because of (1) the downgrade of Citibank's long-term deposit rating to A3 from A1, which lowers the servicing stability category to above average from strong, and (2) the deterioration in CitiMortgage's collection loan performance, which lowers the prime collection category to above average from strong.

RESEARCH HIGHLIGHTS Notable research published the week ending 21 September 2012

33 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Corporates

Global Automotive Manufacturers: Sluggish European Demand Continues to Weigh On Global Auto Sales Growth

We are maintaining our stable outlook on the global automotive manufacturers, as we forecast global light vehicle sales to grow 4.4% in 2012. We now expect that European light vehicles will contract 8.0% in 2012 because of weaker markets in southern Europe

US Consumer Durables Companies' Revenue Exposure to Europe Is Low, Limiting Risk

Our report identifies 23 rated US consumer durable companies that derive a portion of their revenues from Europe. In general, the sector’s exposure to European revenues is low, with the US durable goods companies generating just under 15% of their total revenues from Europe.

US Life Science - Operating-Profit Growth Will Hold Steady Despite Weakening Demand In Europe

Our outlook for the US life science industry is stable as operating-profit growth remains 2% to 4%. We are, however, taking an increasingly cautious tone amid weakened European demand.

Moody's SGL Monitor: Liquidity-Stress Index Rises, but Remains Near Record Low

Our Liquidity-Stress Index (LSI) rose to 3.5% in August, but remains near July’s record low of 3.1%. The index has held in a tight and low range since the beginning of the year, indicating that speculative-grade companies have good liquidity to manage their cash needs over the coming 12 months.

Moody's CFG 100 Research Archive - EMEA Edition

Our portal to select credit research published by, or including contributions from our Corporate Finance Group in EMEA.

RESEARCH HIGHLIGHTS Notable research published the week ending 21 September 2012

34 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Financial Institutions

US Banking Quarterly Credit Update – 2Q12

The improving trend in US bank asset quality continued in the second quarter of 2012 across all key indicators. And while up until now non-performing asset improvement has been marginal due to inflows of restructured credits, these inflows declined notably during the quarter, though they remain relatively high.

Assessing the Vulnerability of Australian Banks to a Downturn in the Housing Sector

Australia’s major banks have sufficient earnings capacity and capital to absorb direct housing loan-related credit losses under our stress scenarios, so that even in a highly adverse scenario credit losses from housing portfolios would unlikely exceed the banks’ earnings capacity. Adverse outcomes are more pronounced for the country’s regional banks, for which stressed housing-related credit losses would be at least 50% higher.

California Workers' Compensation Reforms Modest Credit Negative for Insurers

California’s recently passed workers’ compensation reform bill is projected to improve claims-related expense efficiencies, and provides additional coverage for catastrophically injured workers. It has also prompted the state’s ratemaking bureau to reduce its indicated premium rate hike for 2013. We consider the legislation to be a modest credit negative for insurers, as it could place further downward pressure on rates at a time when rate adequacy and profitability are already poor.

Long-Term Care Insurance: Sector Profile

Long-term care in the US is a niche product market with a relatively short history and checkered past. Despite the need for this non-medical coverage by an aging population, persistent losses, a challenging operating environment and the continuing exit of key market players make the product’s future uncertain as it currently stands.

Brazilian Asset Management: State of the Industry and Recent Trends

The Brazilian asset management industry is characterized by good controls and transparency, but while it has seen significant growth in the past few years, ownership of funds is relatively concentrated and challenges remain. These include the disparity of wealth in Brazil, the relative shallowness of the domestic capital markets and “key-man” risk at smaller, independent firms.

RESEARCH HIGHLIGHTS Notable research published the week ending 21 September 2012

35 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

Sovereigns

Sovereign Monitor: Focus on Argentina – September 2012

The newsletter focuses on credit-relevant events in Argentina, including recent policy decisions that have discouraged much-needed foreign investment in the country, stalling economic growth. Also, the combination of the government’s unreliable economic statistics, continued underpayment of debt obligations, and lack of resolution of debt arrears raise questions about the sovereign’s willingness to pay and highlight underlying credit risks.

Mongolia Credit Analysis

Mongolia’s B1 government bond rating is consistent with our methodology scores of low economic and institutional strengths, moderate government financial strength, and high event risk. Long-term economic prospects are bright, but the near-term fiscal outlook is clouded by spending pressures which contribute to macroeconomic volatility.

European Financial Stability Facility Credit Analysis

The provisional (P)Aaa long-term and (P)Prime-1 short-term ratings for the debt issuance programme of the European Financial Stability Facility (EFSF) is based on the EFSF’s contractual elements, including the irrevocable and unconditional guarantees by the participating euro area member states, as well as the creditworthiness of the participating states and their firm commitment to the EFSF.

Malta Credit Analysis

The Government of Malta’s A3 sovereign rating and negative outlook are underpinned by the country’s medium economic strength, high institutional strength, medium government financial strength and low susceptibility to event risk. The medium economic strength assessment reflects Malta’s moderately favorable long-term economic prospects, while a relatively high GDP per capita denotes a high level of economic development.

Bangladesh Credit Analysis

Bangladesh's Ba3 sovereign rating reflects our methodological assessment of low economic, institutional and government financial strengths. Offsetting such weak structural fundamentals, Bangladesh has established a track record of resilient growth and ongoing poverty reduction, while exhibiting a low susceptibility to event risks—despite the contentiousness of its parliamentary democracy. The outlook is stable.

RESEARCH HIGHLIGHTS Notable research published the week ending 21 September 2012

36 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

US Public Finance

Rating Actions Not Anticipated for Local Government Issuers Due to Hurricane Isaac

Debt service interruptions related to the 28-29 August storm are not likely nor do we anticipate any rating or outlook changes for the 28 rated local government issuers (with $1.85 billion in total rated debt) in coastal Mississippi and Louisiana. Much of the expense associated with the hurricane, the fourth largest of the 2012 season, will be reimbursed by the federal government.

US States Sector Outlook Remains Negative

This reflects ongoing macroeconomic risks and persistent budgetary challenges, says our report, which updates our 2012 sector outlook. While the states remain strong with tax revenues having recovered modestly, they face persistent fiscal challenges due to the slow recovery of the US economy, a weak global economic outlook and risks to states from federal downsizing. States have shown the ability to rein in spending, shift fiscal burdens onto local units and, to a lesser extent, increase tax revenues. These powers are key to states’ credit standing, which remains high.

Structured Finance

Credit Card Statement Newsletter

The settlement between Visa, MasterCard and retailers will have little immediate effect on card securitizations because the fees constitute a small, albeit growing, proportion of the revenue from the securitized receivables. Also discussed: US charge-offs drop again in August, impact of regulatory scrutiny of payment protection products will be minimal, GE trust reduces required seller’s interest.

Credit Insight Newsletter

RMBS from mid-sized UK lenders who have higher concentrations in the certain areas of the country will have relatively greater arrears, according to the latest issue of our newsletter on European RMBS and ABS. Also discussed: why restructuring proposals in response to recent bank downgrades are credit negative for outstanding transactions, a new French rent control decree, among other topics.

European REITs and REOCs: Asset Quality Supports Ratings

We expect our investment-grade issuers to continue employing strategies to preserve cash resources and/or avoid increasing their borrowings, thereby maintaining adequate headroom under their financial covenants and protecting their liquidity positions.

RECENTLY IN CREDIT OUTLOOK Select any article below to go to last Thursday’s Credit Outlook on moodys.com

37 MOODY’S CREDIT OUTLOOK 24 SEPTEMBER 2012

NEWS & ANALYSIS Corporates 2 » Diesel Price Hike Is Credit Positive for India's State-Owned

Oil Companies

Banks 3 » New Prudential Measures in Hong Kong Are Credit Positive

for Banks

Insurers 5 » HCSC’s Alliance with Blue Cross and Blue Shield of Montana

Would Be Credit Positive

Sovereigns 6 » Latvia's Revenue Performance and Loan Prepayment Strengthen

Its Creditworthiness

US Public Finance 7 » Federal Budget Sequestration to Include Build America Bond

Subsidies; Credit Negative for US Municipal Issuers » Wisconsin’s Act 10 Ruled Unconstitutional; Credit Negative for

Local Governments

CREDIT IN DEPTH Outlook for the US Government’s Debt Rating 10

Budget negotiations in 2013 will likely determine the direction of the US government’s Aaa negative rating. If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable. If negotiations fail to produce such a plan, we would expect to lower the rating, probably to Aa1. The maintenance of a Aaa with a negative outlook into 2014 is highly unlikely unless certain conditions prevail.

MOODYS.COM

Report: 145610

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EDITORS PRODUCTION ASSOCIATE News & Analysis: Elisa Herr, Jay Sherman and Alexis Alvarez

David Dombrovskis

Ratings & Research: Robert Cox Final Production: Barry Hing