Profile: Germany's Flagship Development Bank. Strategy: Promotional Mandate Trumps Profit Maximization

Transcription

1 Primary Credit Analyst: Christian Esters, CFA, Frankfurt (49) ; Secondary Contact: Anna Lozmann, Frankfurt (49) ; Table Of Contents Major Rating Factors Rationale Outlook Profile: Germany's Flagship Development Bank Government Support: An Explicit Federal Guarantee Covers All Of KfW's Obligations Strategy: Promotional Mandate Trumps Profit Maximization Asset Quality: Strong, And Expected To Remain So Profitability: Moderate And Stable Results Funding And Asset-Liability Management: Ample Access To Liquidity Capital: Stable Equity Levels Related Criteria And Research DECEMBER 19, Standard & Poor's. All rights reserved. No reprint or dissemination without Standard & Poor s permission. See Terms of Use/Disclaimer on the last page

2 Major Rating Factors Strengths: An explicit guarantee from the Federal Republic of Germany covers KfW's liabilities, and KfW benefits from the government's legal maintenance obligation (Anstaltslast). We consider there's an "almost certain" likelihood that KfW would receive timely and sufficient extraordinary support from the German government in an event of financial distress. We see a "critical" public policy role and "integral" link with the government because KfW supports the government's economic policy objectives. Issuer Credit Rating AAA/Stable/A-1+ Weaknesses: The rating is contingent on government support through the maintenance obligation and federal guarantee. Rationale The ratings on German state-owned development bank KfW are based on an explicit federal government guarantee for KfW's liabilities. In addition, KfW--an institution incorporated under German public law--benefits from the federal government's maintenance obligation (Anstaltslast), which requires the federal government to safeguard KfW's economic health and maintain its ability to operate and meet its obligations in a timely manner. Standard & Poor's Ratings Services believes that there is an "almost certain" likelihood that KfW would receive timely and sufficient extraordinary support from the government of the Federal Republic of Germany (unsolicited AAA/Stable/A-1+) in the event of financial distress. In accordance with our criteria for government-related entities (GREs), such as KfW, we consider that KfW has: A "critical" role in implementing the federal government's economic policies, as KfW is Germany's flagship development bank and ranks among the largest financial institutions in Germany. The government uses KfW to help achieve its economic policy goals, for instance with subsidized loan programs; and An "integral" link with Germany's central government and, to a lesser extent, the governments of the federal states. The Federal Republic of Germany owns 80% of KfW, and the regional states hold 20%. KfW has the status of a public law institution. KfW reported total assets of 512 billion at year-end 2012, up 3.4% from 2011's figurre. On Sept. 30, 2013, total reported assets stood at 476 billion. KfW issues debt in international capital markets and uses the proceeds through the commercial banking system to provide financing for infrastructure, small and midsize enterprises (SMEs), housing, and environmental projects in Germany and, to a limited extent, elsewhere in Europe. In 2012, KfW's medium- and long-term funding reached nearly 79.0 billion, and for 2013 it expects somewhat more than 65 billion. Abroad, KfW is responsible for Germany's DECEMBER 19,

3 official financial cooperation with developing countries as well as export and project financing. KfW's legally independent subsidiary, KfW IPEX-Bank GmbH (AA/Stable/A-1+), handles export and project financing. In addition, the German government has used KfW to implement economic and fiscal policy goals in the wake of the 2008 global downturn. For instance, KfW played a pivotal role in implementing the German government's fiscal stimulus packages in KfW also assumed 15.2 billion of Germany's contribution for the loan package from eurozone countries to Greece (Hellenic Republic), and the German government is guaranteeing KfW's loans to Greece. Since the second half of 2013, an amendment to the KfW law has become effective, which gives power to the Federal Ministry of Finance (in consultation with the Federal Ministry of Economics and Energy) to declare provisions of European and German bank regulation applicable by analogy to KfW. The German bank regulator, BaFin, has assumed the supervision of such provisions. The legal supervision of KfW remains with the Federal Ministry of Finance however, in consultation with the Federal Ministry of Economy and Energy. In 2012, KfW's operating profit was 2.2 billion before valuations, up from 1.9 billion in 2011, and net income was 2.4 billion. In the first nine months of 2013, operating profit before valuations and before promotional activities stood at 1.8 billion (down from 2.1 billion for the corresponding period in 2012), and net income at 0.9 billion (versus 1.7 billion). KfW's shareholder equity-to-assets ratio increased to 4.0% in The core capital ratio increased to 18.2% in 2012, compared with 15.4% a year earlier. The KfW group's total new lending increased to 73.4 million in Outlook The stable outlook on KfW reflects that on the Federal Republic of Germany. We believe that the explicit and implicit support from the federal government will continue, underpinned by the European Commission's confirmation of Germany's Anstaltslast and the federal government's guarantee of KfW's obligations as stipulated under a 2002 agreement. Profile: Germany's Flagship Development Bank KfW generally acts as a refinancing agency, which does not put it in direct competition with commercial banks. KfW's promotional mandate is very wide, including promotion of financing for small and midsize enterprises (SMEs), environmental protection, housing, infrastructure, education, project and export finance, and development cooperation. The government uses KfW mainly to achieve its economic policy goals. In addition to KfW's ongoing lending programs, this was demonstrated, for instance, by the government's stimulus packages and the bail-out package for Greece. With a balance sheet of 476 billion as of Sept. 30, 2013, KfW is the largest national development bank that we rate and one of the largest financial institutions in Germany. The Federal Republic of Germany owns 80% of KfW and the DECEMBER 19,

4 federal states 20%. The federal government unconditionally and irrevocably guarantees all of KfW's liabilities. KfW was founded in 1948 to finance post-war reconstruction efforts in Germany, but has since developed and enlarged its banking remit. As expected, since the second half of 2013, an amendment to the KfW law has become effective. This amendment gives power to the Federal Ministry of Finance (in consultation with the Federal Ministry of Economics and Energy) to declare provisions of European and German bank regulation applicable by analogy to KfW. The German bank regulator, BaFin, has assumed the supervision of such provisions. The legal supervision of KfW remains with the Federal Ministry of Finance however, in consultation with the Federal Ministry of Economy and Energy. KfW operates under separate brands (see chart 1). Since 2009, its domestic activities have centered on three main brands: KfW Mittelstandsbank: Programs for SMEs and other commercial clients, including financial support for start-ups and company environmental-protection investments. KfW Mittelstandsbank is the largest brand, representing 32% of KfW's loan operations in 2012; KfW Privatkundenbank (24% of loan operations in 2012): Programs for private clients in the areas of housing, the environment, and education; and KfW Kommunalbank (12% of loan operations in 2012): Programs for public clients, such as municipalities or regional promotional banks. As part of its internal modernization process, KfW realigned its domestic business areas in It merged KfW Privatkundenbank, KfW Kommunalbank, and certain activities of its capital markets business into a single business area. In addition, KfW Entwicklungsbank is responsible for financial cooperation with developing and emerging countries for the federal government, which carries most of the associated risks. Generally, KfW disburses loans and grants, of which certain funds originate from the federal budget. Moreover, KfW uses its own funds, which are mostly guaranteed by the Federal Republic of Germany. In addition, KfW owns 100% of the following subsidiaries: KfW IPEX-Bank, a legally independent entity since 2008, which operates in project and corporate finance worldwide, and in export and trade finance (18% of the group's total loan operations in 2012). KfW IPEX-Bank was spun off from KfW following an agreement between Germany and the EC in March The EC considered KfW IPEX-Bank's financing activities to be in direct competition with the private sector. Therefore, ongoing government support would have constituted state aid, in contravention of EU rules and regulations. Accordingly, and unlike KfW, KfW IPEX-Bank does not benefit from an explicit government guarantee. Instead, KfW lends funds to KfW IPEX-Bank at market rates, with the rating differential between parent and subsidiary determining the risk spread KfW charges its subsidiary; and Deutsche Investitions- und Entwicklungsgesellschaft (DEG; not rated), an institution which complements KfW Entwicklungsbank's activities by focusing on private-sector investments in developing and transition countries. Combined, KfW Entwicklungsbank and DEG accounted for 8% of the group's loan operations in DECEMBER 19,

5 Chart 1 In 2012, the KfW group's total new lending increased to 73.4 billion. The 2010 peak is related to the fiscal stimulus packages and their phasing out after Under these stimulus packages, the federal government authorized KfW to provide loans via onlending banks or directly to corporate clients as part of a consortium of banks. KfW exempted onlending banks from risk liability of up to 90%. Within the consortium, KfW took a maximum of 50% of the risk. KfW received a full guarantee from the federal government for the corporate and bank credit risks it assumed. The stimulus packages totaled a maximum of 52.5 billion, nearly 80% of which fell under KfW Mittelstandsbank's responsibility and mainly targeted financing for credit-constrained companies. At year-end 2010, the application period for various credit programs, which had been initiated in connection with the stimulus packages, expired according to plan. New commitments could be made until June 30, KfW's pivotal function in the largest economic stimulus program in Germany's history underpins our view of its "critical" role for the federal government. Since 2010, KfW has assumed 15.2 billion of Germany's contribution for the loan package from eurozone countries to Greece. The German government is guaranteeing all KfW's disbursements to Greece under that contribution. Domestically, KfW generally acts as a refinancing agency, which for the most part shields it from competition from DECEMBER 19,

6 commercial banks. Commercial banks onlend funds provided by KfW, usually with a fixed markup over KfW's rate. By lending to an intermediary, KfW insulates itself from credit exposure to the ultimate borrower. Since 2002, KfW has also extended general loans directly to banks that are earmarked for public policy purposes, but not tied to specific projects or borrowers. It has granted the majority of these loans to the development banks of German states (Landesförderinstitute), for which the respective state provides a guarantee. Apart from KfW IPEX-Bank and DEG, which are both consolidated into KfW's accounts under International Financial Reporting Standards (IFRS), KfW has no other material equity exposures. KfW continues to hold a 17.4% stake in telecommunications operator Deutsche Telekom AG (the federal government holds 14.5%). It also owns 24.9% of postal services provider Deutsche Post AG, which it purchased from the federal government. The government still carries the market risk on these stakes, however, meaning that any related capital gains or losses are for the government's account. Government Support: An Explicit Federal Guarantee Covers All Of KfW's Obligations The Federal Republic of Germany and the federal states jointly own KfW, which is supervised by the Federal Ministry of Finance in consultation with the Federal Ministry of Economics and Technology. Under the Anstaltslast, the federal government is legally required to safeguard KfW's ability to meet its obligations. Since 1998, KfW has also benefited from an explicit statutory guarantee for its obligations. We believe that KfW's future as a public bank is secure because of the federal and state governments' commitment to KfW and legislation that prevents KfW's privatization. An explicit federal government guarantee covers KfW's liabilities. In addition, KfW benefits from the Anstaltslast, which requires the federal government to safeguard KfW's economic health and maintain its ability to operate and meet its obligations in a timely manner. In addition, in application of our criteria for GREs, we believe there is an "almost certain" likelihood that KfW would receive extraordinary support from the German federal government in the event of financial distress. In our view, KfW plays a "critical" role in the implementation of the federal government's economic policies and has an "integral" link with the federal government and, to a lesser extent, the governments of the German federal states. As a public-law institution, ownership of KfW is restricted to the federal government and the federal states. The law also prohibits KfW from distributing profits. Instead, KfW allocates profits to statutory and special reserves. We understand political discussions about allowing KfW to distribute profits have been discontinued. KfW's Board of Supervisory Directors oversees KfW's overall activities and has the power to appoint or dismiss members of the Executive Board. The 37-member supervisory board includes several ministers, parliamentary representatives, and private-sector and trade-union representatives, who are appointed in consultation with the federal government. In accordance with KfW's public mission, the Federal Minister of Finance and the Federal Minister for Economics and Technology alternate as chairman and deputy chairman. The federal government's obligation to KfW under the Anstaltslast constitutes a charge on public funds that would be DECEMBER 19,

7 realizable without an act of parliament. The maintenance obligation alone, however, does not constitute a formal guarantee of KfW's obligations, and KfW's creditors do not have a direct claim against the federal government under the Anstaltslast. In addition to the Anstaltslast, and effective from April 1, 1998, a statutory guarantee was included in the legislation governing KfW, through which the federal government expressly guarantees KfW's obligations. Under this statutory guarantee, in the event of a payment default, holders of securities issued or guaranteed by KfW can enforce their claims directly against the federal government without first recourse to the bank. KfW's future as a public-sector bank appears secure, in our view. The reorganization of the German government's activities in economic promotion and financial cooperation has left KfW as one of the country's leading economic policy instruments. The only losses KfW has experienced in its history occurred in 2007 and 2008, and resulted from financial issues at IKB, in which KfW held a minority interest, and to some extent the financial market disruption. In March 2002, Germany and the European Commission reached an agreement on future sovereign support for state development banks. Under the agreement, the Commission considers the federal guarantee and Anstaltslast compatible with European competition rules for the majority of KfW's public policy mandates. However, it was decided that most of KfW's project and export financing should be conducted through a separate entity. The new KfW IPEX-Bank was created for this purpose in 2004 and became a legally independent subsidiary in 2008, without the statutory guarantees or government support extended to KfW-IPEX. Strategy: Promotional Mandate Trumps Profit Maximization As a development bank, KfW's strategy is not to maximize profit, but to fulfill its developmental and promotional mandate. KfW's main promotional instruments are loans, but it also provides mezzanine and equity capital, loan securitizations, and consulting services. KfW's long-term objective is to remain a leading provider in Germany of financing for SMEs, promotional activities, and export and project development. Furthermore, through its international financial cooperation and other services, KfW aims to continue its important role within the government's economic and international development policies. As a specialized development bank, KfW's business strategy does not primarily target profit maximization, but it focuses on a mandate of economic promotion and development. It seeks to maintain sufficient profitability to allow suitable provisions for recognizable risks, strengthening of its equity base, and the maintenance of its subsidized loan programs. KfW's main domestic promotional instruments are: Loans: Promotional loans account for most of KfW's domestic instruments. KfW originates specific-purpose long-term loans that are usually onlent by other banks, which assume the exposure to the end borrower. In recent years, KfW has issued global loans directly to banks that are tied to a public policy purpose, but not to a particular project or ultimate borrower. Mezzanine and equity capital: These instruments typically constitute about 2%-3% of KfW's total domestic finance DECEMBER 19,

8 and are aimed at business start-ups and SMEs. Asset Quality: Strong, And Expected To Remain So The quality of KfW's loan book has traditionally been strong, in our view, and write-offs have consistently been moderate. We believe that KfW's future credit quality performance should remain strong because it takes on small amounts of direct credit risk. KfW's loans-to-assets ratio remains high. It was about 80% at year-end Most of the loans KfW grants are for domestic promotional business and amounted to 50.6 billion, or nearly 70% of total new lending, in Export and project finance accounted for 18% of KfW's total lending commitments and financial development cooperation accounted for 8%. KfW's 36 billion cash and securities portfolio represented about 7% of total assets as of year-end This portfolio is composed primarily of highly rated, long-term debt securities and minor equity positions. About two-thirds of the portfolio is negotiable securities for liquidity purposes. The remaining financial assets were securities held as substitutes for loans or as equity investments in the context of KfW's promotional business. Despite a decade of lending growth, loan quality has remained strong, in our view. KfW transfers most of its lending risk to other banks through onlending or through guarantees from export credit agencies, for example. Of KfW's net exposure, more than 50% is to financial institutions. The remainder is private households, public authorities, and exposures that relate to export and project financing, executed via the subsidiary KfW IPEX-Bank, although KfW assumes some of the risk of these lending activities. We expect KfW's asset quality to remain strong. This is because we assume KfW's business model, lending policies, and risk profile are unlikely to change materially. In our view, KfW carefully monitors its exposures and is well provisioned against potential credit risks. Profitability: Moderate And Stable Results We expect KfW to continue delivering moderate profitability, which is characteristic of the bank and in line with its public policy mandate. Net interest remains the bank's single most important source of income. In keeping with KfW's public policy mandate, profitability has traditionally remained moderate and mostly stable, based mainly on KfW's favorable funding conditions. KfW's primary consideration is to promote economic development rather than profit maximization. However, the bank's business model protects it from excessive operational losses because it typically shifts the majority of the ultimate credit risk to intermediaries or the government. That said, KfW's management seems committed to maintaining sufficient overall profitability to allow for risk provisions and to maintain adequate capitalization. In 2012, KfW's net income was 2.4 billion, or 47 basis points of average assets and guarantees. This compares with DECEMBER 19,

9 2.1 billion in Net interest income stood at 58 basis points of average assets in 2012, up from 51 basis points in The operating result before valuation rose to 2.2 billion in 2012, from 1.9 billion in Over the first nine months of 2013, operating profit before valuations and before promotional activities stood at 1.8 billion, down from 2.1 billion over the same period in Net income was 0.9 billion, down from 1.7 billion. We expect KfW to continue posting its characteristically moderate profitability, in line with its public policy mandate. Despite the bank's rapid growth over the past 10 years, KfW continues to benefit from a relatively small cost base, reflecting the wholesale nature of the bulk of its businesses. KfW's cost-to-income ratio, at 25%, is much lower than the traditional 75% average achieved by a typical German commercial bank. Funding And Asset-Liability Management: Ample Access To Liquidity In 2014, KfW expects to issue 65 billion- 70 billion in long-term funding. The bank issues primarily in euros and U.S. dollars. In our view, KfW continues to enjoy ample and ready access to capital market funding, supported by the federal government guarantee that shields KfW's creditworthiness. Typical for a wholesale bank without a large depositor base, KfW relies on funds from domestic and international capital markets and, to a limited extent, from government and other public budgets. KfW raised 78.7 billion of long-term funding in the capital markets in 2012, and it expects to raise just above 65 billion in 2013 (see chart 2). In 2014, KfW expects to raise 65 billion- 70 billion. DECEMBER 19,

10 Chart 2 KfW's funding strategy includes: High-volume benchmark bond issuance under euro- and dollar-denominated programs, which provided 60% of funding in 2013 compared with 59% in 2012; Other public transactions (35% in 2013); and Private placements (5% in 2013) under various issuance programs. Long-term funding remains dominated by issuance in euros and U.S. dollars, British pound sterling, Australian dollars, and Japanese yen. KfW operates a multicurrency commercial paper (CP) program with a limit of 40 billion and a U.S. CP program with a limit of $10 billion. KfW has access to the European Central Bank's refinancing operations, and most of its securities are eligible as collateral. KfW's asset-liability management aims to broadly match the loan and funding portfolios. We believe that, currently, KfW's internal requirements concerning counterparty credit quality, use of credit enhancements, and the monitoring of its overall risk position are in line with industry practices. KfW primarily uses swaps and other derivative instruments to hedge interest rate and currency risks, and does not currently trade in equities. DECEMBER 19,

11 Capital: Stable Equity Levels KfW's capitalization increased to 4.0% of total assets on the back of profits in Core capital ratio increased to 18.2% over the same period. Owing to retained profits along ongoing asset growth, KfW's equity ratio increased to 4.0% of total assets at year-end The core capital ratio increased to 18.2% at year-end 2012 (from 15.4% in 2011, and again to 20.6% at the end of the third quarter of Table 1 KfW Key Figures (Mil. ) Adjusted assets 511, , , , ,764 Customer loans (gross) 118, , ,099 99, ,444 Adjusted common equity 20,665 18,064 15,998 13,368 12,310 Operating revenues 3,583 2,702 3,078 2, Noninterest expenses Core earnings 2,384 2,068 2,631 1,126 (2,656) Narrow liquid assets/3-month wholesale funding (x) N/A N/A N/A N/A N/A N/A--Not applicable. Table 2 KfW Business Position (Mil. ) Loan market share in country of domicile N/A N/A N/A N/A N/A Deposit market share in country of domicile N/A N/A N/A N/A N/A Return on equity (19.9) N/A--Not applicable. Table 3 KfW Capital And Earnings (Mil. ) Tier 1 capital ratio S&P RAC ratio before diversification N.M. N.M. N.M. N.M. N.M. S&P RAC ratio after diversification N.M. N.M. N.M. N.M. N.M. Adjusted common equity/total adjusted capital Double leverage N.M. N.M. N.M. N.M. N.M. Net interest income/operating revenues ,111.6 Fee income/operating revenues Market-sensitive income/operating revenues (0.4) (2.1) (2,424.2) Noninterest expenses/operating revenues Preprovision operating income/average assets (0.2) Core earnings/average managed assets (0.7) RAC--Risk-adjusted capital. N.M.--Not meaningful. DECEMBER 19,

12 Table 4 KfW Risk Position (Mil. ) Growth in customer loans (4.9) 4.2 Total diversification adjustment/s&p RWA before diversification N.M. N.M. N.M. N.M. N.M. Total managed assets/adjusted common equity (x) New loan loss provisions/average customer loans 0.1 (0.2) (0.4) Net charge-offs/average customer loans RWA--Risk-weighted assets. N.M.--Not meaningful. Table 5 KfW Funding And Liquidity (Mil. ) Core deposits/funding base Customer loans (net)/customer deposits Long term funding ratio Stable funding ratio N/A N/A N/A N/A N/A Short-term wholesale funding/funding base Broad liquid assets/short-term wholesale funding (x) N/A N/A N/A N/A N/A Net broad liquid assets/short-term customer deposits N/A N/A N/A N/A N/A Short-term wholesale funding/total wholesale funding N/A--Not applicable. Related Criteria And Research Related Criteria Principles Of Credit Ratings, Feb. 16, 2011 Enhanced Methodology And Assumptions For Rating Government-Related Entities, June 29, 2009 Rating Sovereign-Guaranteed Debt, April 6, 2009 Related Research KfW IPEX-Bank GmbH, May 24, 2013 Ratings Detail (As Of December 19, 2013) KfW Issuer Credit Rating Commercial Paper Foreign Currency Senior Unsecured Short-Term Debt AAA/Stable/A-1+ A-1+ AAA A-1+ Issuer Credit Ratings History 17-Jan-2012 Foreign Currency AAA/Stable/A Dec-2011 AAA/Watch Neg/A Aug-1998 AAA/Stable/A Jan-2012 Local Currency AAA/Stable/A-1+ DECEMBER 19,

13 Ratings Detail (As Of December 19, 2013) (cont.) 07-Dec Aug-1998 AAA/Watch Neg/A-1+ AAA/Stable/A-1+ *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country. Additional Contacts: SovereignEurope; SovereignEurope@standardandpoors.com Financial Institutions Ratings Europe; FIG_Europe@standardandpoors.com DECEMBER 19,

14 Copyright 2013 by Standard & Poor's Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc.All rights reserved. No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an as is basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at DECEMBER 19,