New Issue: Moody's revises New Orleans' (LA) outlook to stable; assigns A3 to
$65M GO Taxable Public Improvement Bonds, 2015A
Global Credit Research - 06 Mar 2015
A3 affirmed on outstanding parity debt
NEW ORLEANS (CITY OF) LA
Cities (including Towns, Villages and Townships)
LA
Moody's Rating
ISSUE
Taxable Public Improvement Bonds, Issue of 2015A
Sale Amount
$65,000,000
Expected Sale Date
03/18/15
Rating Description
General Obligation
RATING
A3
Moody's Outlook STA
NEW YORK, March 06, 2015 --Moody's Investors Service has assigned an A3 underlying rating to the City of
New Orleans', LA, $65 million General Obligation (GO) Taxable Public Improvement Bonds, 2015A. At the same
time we affirm the A3 rating on outstanding parity debt. We also affirm the A3 rating on $195.8 million in Limited Tax
Refunding Bonds Series 2012 as well as $710,000in Limited Tax Audubon Park Bonds issued in 1996. We have
also revised the outlook on the bonds to stable from negative.
SUMMARY RATING RATIONALE
The A3 ratings are influenced by the strengthening local economy which is large and continues to expand at a
stable pace, a modest improvement in the financial performance and position of the city's operating funds, and high
annual fixed costs when compared to the budget. The ratings also incorporate ongoing challenges the city faces,
which include narrow liquidity, management of consent decrees, and a poorly funded pension plans and OPEB
obligations. The A3 ratings also take into consideration considerable strength as provided by oversight from the
Board of Liquidation.
OUTLOOK
We have revised the outlook to stable from negative which reflects the city's ability to approach structural balance
within its operating funds, produce two years of modest operating surpluses, regain positive year-end General
Fund balances, and commitment to building reserve levels. Future credit reviews will focus on the city's ability to
successfully manage funding its various pension plans as well as address growing fixed costs, which remain a
challenge.
WHAT COULD MAKE THE RATING GO UP
- Trend of solid balance sheet performance with sustained improvement in reserve position
- Significant decline in debt profile
- Continued expansion of tax base with improved socioeconomic indices
- Successful management and reduction of pension burden
WHAT COULD MAKE THE RATING GO DOWN
- Lack of improvement in financial metrics and prolonged weak liquidity
- Inability to manage growing fixed costs including pension burden
- Unforeseen challenges related to firefighter pension plan, consent decrees, or litigation
STRENGTHS
- Large, stable tax base that is expanding
- Strong sales tax and property tax collection growth
- Modest improvement in financial operations and liquidity
- Board of Liquidation oversight
CHALLENGES
- Poor funding of pension plans
- Ongoing consent decrees
- Weak liquidity
RECENT DEVELOPMENTS
Recent developments are captured in the detailed credit discussion.
DETAILED RATING RATIONALE
ECONOMY AND TAX BASE: LOCAL ECONOMY EXPANDS; SHORT TERM AND LONGER TERM
PROSPECTS REMAIN POSITIVE
We anticipate near-term expansion within the city's large tax base, given ongoing development and recent solid
growth in taxable assessed valuation. The expanding local economy is a particular credit strength. The city's
current estimated population is roughly 379,000 which is below pre-Katrina totals, yet represents continued
modest annual growth. For fiscal 2015 the city's total taxable assessed valuation is a sizeable $3.80 billion (or an
equalized full valuation of approximately $27.87 billion), which reflects a solid 6.9% growth over the previous year.
The five-year compound annual growth in taxable value is solid at 4.6% and reflects ongoing development in the
city. The city's local economy has historically been driven by tourism, trade, oil and gas operations, port
operations, healthcare, and higher education. The city's top taxpayers make up a modest 10.6% of total assessed
valuation, and include a casino, hotel, retail shopping center, a coffee roasting plant, and utilities. The city is also
home to Tulane University (11,944 students, A2 stable) and acts as a regional center for healthcare operations
and services.
Officials note several ongoing and new developments currently underway in the city. Viking Cruises, a river and
ocean cruise line, announced it will start its North American operations at the Port of New Orleans, including an
office location. Viking Cruises has plans to construct six new vessels over the next several years and cruises are
anticipated to begin traveling the Mississippi River as soon as 2017. The Veterans Affairs Hospital ($1 billion) is
nearing completion and is on track to start receiving patients in 2016. Operations at the Riverwalk retail shopping
mall remain strong following a $70 million renovation that was completed in 2014. There are also several major real
estate developments that will soon house major retail chains. Strong growth in sales tax collections is one
indication that commercial and retail development in the city is stable.
Socioeconomic indices for the city are below average, evidenced by a per capita income and median family
income of 93.2% and 71.7% of national levels, respectively. The December 2014 unemployment rate for the city
was 7.1%, which was above that of the state (6.2%) and the national average (5.4%) for the same time frame. The
December 2014 unemployment rate was 1.6% higher than the same time in the previous year.
Moody's Economy notes short term and longer term prospects for the region remain strong and positive. Moody's
Economy reported in November 2014 that New Orleans-Metairie-Kenner's recovery will accelerate heading into
2015. Private services and trade will drive growth, along with an expanding healthcare segment. Yet a shrinking
public sector will cancel some gains, leaving New Orleans shy of a complete recovery. Moody's Economy also
reported that long term, sluggish population growth will leave the metro area trailing the South.
FINANCIAL OPERATIONS AND RESERVES: IMPROVING FINANCIAL PERFORMANCE DRIVEN BY
GROWING TAX COLLECTIONS AND CLOSE MONITORING OF EXPENDITURES; LIQUIDTY REMAINS
NARROW
Modest improvement in the city's financial operations is a credit positive that is reflected in the revision of the
outlook to stable. Future credit reviews will focus on the city's ability to maintain a trend of stable balance sheet
performance while building currently weak liquidity to adequate levels. Following several years of significant
operating deficits, the city's operating fund performance has improved modestly as a result of expenditure
management, conservative revenue assumptions, and strong tax revenue growth. For the first time since fiscal
2009, surplus operations resulted in a positive year-end (December 31) General Fund balance. At fiscal year-end
2013 the city's General Fund balance totaled a modest $16.9 million (or a still narrow 3.1% of General Fund
revenues) which reflected an increase of $26.3 million over fiscal year-end 2012. Moody's notes, for fiscal 2013
the city's combined total actuarial shortfall for funding of its pension obligations was $23.4 million which would
negate the modest surplus realized in the General Fund. In order to get closer to structural balance, the city would
need to address its pension funding shortfall. In fiscal 2013, growing sales tax collections aided financial
performance. Sales tax collections in fiscal 2013 totaled $176.4 million which reflects an 8.1% increase over the
previous year. Fiscal year 2013 General Fund revenues were primarily derived from sales taxes (32% of total
General Fund revenues), property taxes (26%), charges for services (14.4%), and licenses and permits (11.5%).
Officials report solid financial performance through fiscal 2014, which is due in part to continued positive growth in
property and sales tax revenues, as well as close monitoring of expenditures. Total General Fund revenues for
fiscal 2014 are estimated at $520 million (unaudited) and total expenditures are $511 million. City officials anticipate
a modest $9.0 million surplus for the General Fund at fiscal year-end 2014, and growth in unassigned Fund
balance to $17.38 million from $8.3 million. Moody's notes fiscal 2014 assumptions do not include Library Fund
operations and state supplemental pay which is ultimately incorporated into the General Fund for auditing
purposes. The city's fiscal 2014 audit is anticipated to be published in June of 2015. While operating funds are
projected to generate a modest surplus, the city again contributed approximately $20 million below actuarially
required contributions. Full contributions to the pension systems would eliminate the surplus and reduce reserves.
The city has adopted a balanced budget within its operating funds for fiscal 2015 with modest revenue growth
assumptions including a 4% budgeted growth in sales tax collections. The fiscal 2015 budget includes a $2.6
million increase in police department consent decree funding over the previous year, 5% pay raises for all officers,
$11.7 million in additional funds for the fire fighter pension to comply with court order, and $35.6 million in direct
appropriations and other city payments for sheriffs. Moody's notes that while the additional $11.7 million in funding
for the fire fighter pension plan is an improvement over fiscal 2014, the full annual actuarial requirement has yet to
be met. Preliminary unaudited property tax collections are up 4.3% over 2014 including protest payments, and up a
more modest 3.2% without protest payments. Despite ongoing challenges which include rising health care,
worker's compensation, and retirement system costs, as well as pending Federal consent decrees regarding the
Police Department and the Orleans Parish Sheriff's Office, officials' near-term financial projections indicate modest
operating surpluses in the General Fund and management acknowledges a commitment to building reserves if
positive budget variances are realized.
Liquidity
Liquidity in the General Fund remains weak and narrow given the city's sizeable budget. At fiscal year-end 2013
the city's General Fund cash and investment position had improved to $14.6 million (a weak 2.7% of General Fund
revenues), a modest improvement from the narrow liquidity at fiscal year-end 2012 $3.63 million (0.7%). Given
stable financial performance in fiscal 2014, General Fund cash is expected to grow modestly. The city's ability to
manage ongoing budgetary pressures as well as maintenance of stable balance sheet performance while building
reserves will be influencing factors in the rating moving forward.
DEBT AND PENSIONS: SIGNIFICANT FIXED COSTS INCLUDE A HIGH DEBT PROFILE, POORLY
FUNDED PENSIONS, AND GROWING OPEB
Debt structure
We believe the debt profile of the city albeit high, will remain manageable in the near-term. The city's direct debt
burden is 3.0% of full value and 1.38 times 2013 operating revenues, which is above average. The city's overall
debt burden is also above average at 3.7%. Post-sale the city will have roughly $572 million in GO bonds
outstanding and an additional $213 million in outstanding Limited Tax Bonds. The city also has $74.7 million in
outstanding GO Zone obligations and an additional $18 million in HUD loans and notes outstanding. Debt service
costs comprised a high 16.4% of operating expenditures in 2013. Positively, over the last several years roughly
$240 million worth of community disaster loans have been forgiven which has significantly improved the debt
profile of the city. The current $65 million issuance will exhaust the city's remaining bond authorization from the
2004 election. City officials are considering returning to voters in the near-term for additional bond authorization,
yet no concrete plans have been made to date.
A credit strength of the current issue of bonds and the city's debt profile is oversight provided by the Board of
Liquidation. All ad valorem taxes levied by the city for the payment of GO bonds are transferred to the Board of
Liquidation. The Board has the authority to enforce imposition and collection of sufficient taxes for the payment of
GO bonds upon a failure of the City Council to do so. Additionally, the Board has the authority to bill and collect
taxes itself, although this is not currently envisioned. We continue to view the existence of the Board and its roles
and responsibilities related to debt and taxation as a certain credit positive that is an influencing factor in the
current rating.
Debt-Related Derivatives
In 2004 the city issued Variable Rate Revenue Bonds which are payable from payments made by Canal Street
Development Corporation and Downtown Development District pursuant to a Cooperative Endeavor Agreement
and from payments made by the city from the General Fund. As of March 2, 2015, $7.07 million of the Canal Street
Revenue Bonds were outstanding. We do not anticipate the modest variable rate exposure within the city's debt
profile to present challenges in the near to medium term.
Pensions and OPEB
The city's pension and OPEB obligations remain a significant credit challenges for the city. New Orleans has
consistently contributed below actuarial requirements to its single-employer pension plans, deferring costs to
future years. The city has four single-employer pension plans, the Employees' Retirement System, two plans for
Firefighters (new and old), and a closed police plan. The City also participates in the Municipal Police Employees'
Retirement System, which is a statewide cost-sharing plan. The city's contributions to the Municipal Police plan
are set by state statute.
In fiscal 2013, New Orleans contributed approximately $52 million to its single-employer pension plans, $23.4
million, below actuarial requirements. The bulk of the shortfall, $22 million, was attributable to its new firefighters
pension plan. The city's actuarial contribution shortfalls to these plans amounted to approximately 4% of the city
operating revenues in fiscal 2013.
In 2013 a civil district court judge ordered the City to pay $17.5 million to meet the City's 2012 contribution
requirement to the firefighters' pension plan, the most poorly funded of the city's plans. In late 2014 a task force,
which includes vested parties from the city, firefighters, and third party consultants, was established to address
funding of the system moving forward that is viable and acceptable to all parties. Future reviews will consider any
outcomes and changes to the system and its funding ultimately result from this process.
Moody's fiscal 2013 adjusted net pension liability (ANPL) for the City, under our methodology for adjusting reported
pension data, is a sizeable $1.23 billion, or 2.14 times operating revenues. Moody's ANPL reflects certain
adjustments we make to improve comparability of reported pension liabilities. The adjustments are not intended to
replace New Orleans' reported liability information, but to improve comparability with other rated entities. We
determined New Orleans' share of liability for the state-run Municipal Police Employees' Retirement System in
proportion to its contributions to the plan. Moody's ANPL reflects support for pension obligations by funds operated
by the city that are outside the General Fund (Accounting for roughly 35% support for the Employees' Retirement
System and 0.8% support for Municipal Police Employees' Retirement System).
The city contributed $7.7 million to its fiscal 2013 other post employment benefits (OPEB) cost of $10.0 million.
The City currently funds its OPEB obligation on a pay-go basis. The Unfunded Actuarial Accrued Liability (UAAL)
at fiscal year-end 2013 was $149.7 million.
The city's fixed costs, including debt service, total actuarial pension requirements costs, and OPEB obligations,
totaled a sizeable $201.8 million, or a significant 32.8% of operating revenues, in fiscal 2013. We expect the city's
ongoing costs to service its debt and retiree obligations will continue to pose a budget challenge.
MANAGEMENT AND GOVERNANCE
Cities in Louisiana have an institutional framework score of 'Aa' or moderate. The majority of LA cities' operating
revenues are derived from sales taxes and property taxes. Sales tax collections are historically unpredictable as a
major revenue. Cities have the ability to increase both property tax and sales tax millages with voter approval.
Major expenditures for cities are moderately stable, given that public safety (police and fire) is typically cities'
major expenditure. Cities do not have significant constraints with expenditure reduction.
The city has a Mayor-Council plan of government. The Mayor, as the chief executive officer, is elected for a fouryear term. The Council consists of five members elected from districts and two members elected at large, all for
four-year terms. Over the last several years, management has taken prudent steps to address operating
pressures, cut expenditures to balance the operating fund budget, and acknowledges a commitment to building
reserves. Future reviews will continue to examine management's willingness to address ongoing challenges such
as fully funding annual pension obligations.
KEY STATISTICS
- 2015 Full valuation: $27.87 billion (Total Assessed Valuation equal to $3.80 billion)
- Full value per capita: $73,549
- Median Family Income: 71.7% of US
- Operating Fund balance as a % of operating revenues: 15.4%
- 5 year dollar change in operating Fund balance as a % of operating revenues: -4.22%
- Cash balance as a % of operating revenues: 15.37%
- 5 year dollar change in cash balance as a % of Revenues: -4.10%
- Institutional Framework: Aa
- Operating history: 5 year average of operating revenues/operating expenditures: 0.98x
- Net direct debt/full value: 3.05%
- Net direct debt/operating revenues: 1.38x
- 3 year average of Moody's adjusted net pension liability/full value: 5.13%
- 3 year average of Moody's adjusted net pension liability/operating revenues: 2.14x
OBLIGOR PROFILE
The city was founded in 1718, incorporated in 1805, and with an estimated population of 379,000 is the largest
populated city in the state. The city is located in the southeastern portion of the state and lies along the Mississippi
River near the Gulf of Mexico.
LEGAL SECURITY
The bonds are secured by and payable from ad valorem taxes upon all the property subject to taxation within the
city in an amount sufficient to pay the principal and interest on the bonds.
USE OF PROCEEDS
The bonds will exhaust the city's bond authorization from 2004. Proceeds from the sale will be used for
improvement of streets, parks and playgrounds, public libraries and other public buildings.
RATING METHODOLOGY
The principal methodology used in this rating was US Local Government General Obligation Debt published in
January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory
disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class
of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance
with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating
action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in
relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where
the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner
that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for
the respective issuer on www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating
outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal
entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for
each credit rating.
Analysts
James Hobbs
Lead Analyst
Public Finance Group
Moody's Investors Service
Chandra Ghosal
Additional Contact
Public Finance Group
Moody's Investors Service
Rachel Cortez
Additional Contact
Public Finance Group
Moody's Investors Service
Contacts
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA
© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and
affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES
(“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES,
CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH
PUBLICATIONS PUBLISHED BY MOODY’S (“MOODY’S PUBLICATIONS”) MAY INCLUDE MOODY’S
CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS,
OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY
MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY
ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY
OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE
VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE
NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE
QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR
COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S
PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT
RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO
PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S
PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR
INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH
THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS
OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR
PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL
INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY’S CREDIT
RATINGS OR MOODY’S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU
SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO,
COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE
REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED,
REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN
WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON
WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable.
Because of the possibility of human or mechanical error as well as other factors, however, all information contained
herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the
information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be
reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and
cannot in every instance independently verify or validate information received in the rating process or in preparing
the Moody’s Publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors
and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or
damages whatsoever arising from or in connection with the information contained herein or the use of or inability to
use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives,
licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited
to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial
instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors
and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity,
including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability
that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the
control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers,
arising from or in connection with the information contained herein or the use of or inability to use any such
information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER
OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER
WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”),
hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes
and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of
any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees
ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address
the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist
between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also
publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at
publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at
www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder
Affiliation Policy.”
For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services
License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or
Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended
to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By
continuing to access this document from within Australia, you represent to MOODY’S that you are, or are
accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you
represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of
section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a
debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to
retail clients. It would be dangerous for “retail clients” to make any investment decision based on MOODY’S credit
rating. If in doubt you should contact your financial or other professional adviser.
For Japan only: MOODY'S Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of MOODY'S
Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of
MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a
Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are
Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and,
consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ
are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are
FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and
municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as
applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal
and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.