September Default Report

Transcription

1 September Default Report Contact: October 2008 Defaulted debt volumes jump sharply Lehman marks the largest bankruptcy in history The credit crisis intensified in recent weeks with credit spreads reaching all-time highs and many debt markets closed for business. In September, a total of ten Moody s-rated issuers defaulted, including large financial institutions such as Lehman Brothers and Washington Mutual. Year to date, a total of 63 firms have defaulted, surpassing the total issuer default counts for each of the years from 2004 to The bankruptcy filing by Lehman Brothers Holdings, Inc is the largest in history with approximately $128.2 billion of long-term debt outstanding when it filed for Chapter 11, roughly four times the debt of the second largest bankruptcy (WorldCom in 2002). A week later, Washington Mutual Bank was put into FDIC receivership and its parent company - Washington Mutual, Inc. filed for Chapter 11. The two Wamu companies had a total of approximately $19.3 billion of rated debt. Speculative-grade default rates on the rise At the end of the third quarter, Moody's issuer-weighted global speculative-grade default rate closed at 2.8%, up significantly from 2.1% ending the previous quarter. Measured on a dollar-volume basis, the global speculative-grade bond default rate finished the third quarter at 2.7%, more than double its level of 1.3% at the previous quarter. A year ago, the issuer- and dollar-weighted global speculative-grade default rates stood at 1.3% and 0.9%, respectively. In the U.S., the issuer-weighted speculative-grade default rate ended the third quarter at 3.4%, up from 2.5% in the second quarter. At this time last year, the U.S. issuer-weighted speculative-grade default rate stood at 1.2%. Measured on a dollar-weighted basis, the U.S. speculative-grade bond default rate finished the third quarter at 3., up from 1.4% in the prior quarter and 0.7% in the third quarter of last year. In Europe, the issuer-weighted speculative-grade default rates remained unchanged at 0.7% in the third quarter, significantly below the level of 2.9% recorded a year earlier. Measured on a dollar-volume basis, the European speculative-grade default rate finished at 0.9% at the end of the third quarter, up from 0.6% from the previous quarter but down from 1.9% from a year ago. In the leveraged loan market, Autocam Corporation was the only Moody s-rated loan defaulter in September. The trailing 12 month U.S. leveraged loan default rate rose to 2.9% at the end of the third quarter, up from 2. at the end of the second quarter. A year ago, the leveraged loan default rate was much lower at 0.4%. Default rate forecasts pointing north According to Moody's default rate forecasting model, the global speculative-grade default rate is expected to rise sharply to 4.2% by the end of this year and then increase further to 7.9% a year from now. Moody s forecasting model further indicates that the U.S. speculative-grade default rate will rise to 5.1% by end of 2008 with companies in the Consumer Transportation sector expected to experience the highest default rate. For European speculative-grade issuers, the model foresees default rates climbing to 1.5% by the end of this year with the Durable Consumer Goods industry likely to experience the most distress. Consistent with rising default rates, Moody's speculative-grade corporate distress index- which measures the percentage of rated issuers that have debt trading at distressed levels- rose to 29.6% at the end of the third quarter from 17.7% at the end of the second quarter. A year ago, the index was much lower at 4.5%. 1

2 Dollar-weighted investment-grade bond default rate at record high As a result of the Lehman and Wamu defaults, the global dollar-weighted investment-grade bond default rate surged to 4.2% for the trailing 12 month period at the end of the third quarter, marking the highest level since Moody s launched its dollar-weighted investment-grade bond default rate series in A year ago, the dollar-weighted investment-grade bond default rate stood at zero percent. In the U.S., the dollar-weighted investment-grade bond default rate finished the third quarter at 8.1%, also the highest level since the series began in Among European issuers, the dollar-weighted investment-grade bond default rate rose marginally to 0.1%. Changes in Methodology The data contained in this month s MDR reflect certain methodological changes introduced in Moody s 2007 corporate default study: Change in Universe of Study Moody s default rates now include corporate bank loan issuers in addition to bond issuers. The rated loan market has grown considerably since 1995 and has become an important source of capital for highly leveraged issuers. In 2002, only 17% of new speculative-grade rated issuers came to market with bank loans only (no bonds); that proportion increased to 52% in The net effect of this change is to increase the total number of issuers (and observed defaults) in the universe of study. Secondly, we completely omit data for some sub-sovereigns and GSEs that were included in prior years reports. This change is consistent with the report s purpose as an all-corporate study. Change in Senior Rating Histories The inclusion of loan issuers to the universe of study requires a restatement of estimated senior rating histories for some issuers. The credit ratings used in Moody's default statistics do not refer to the ratings of specific debt obligations. Rather, they are notional, issuer-level ratings derived from each issuer's outstanding rated bonds and loans. Because issuers do not always have identical classes of debt outstanding, it is necessary to put their ratings on an equal footing before one can calculate and compare default rates. Estimated senior ratings are derived by a statistical algorithm: first, the rating on each company's senior unsecured bonds is used; if an issuer does not have any rated senior unsecured bonds, the estimated senior rating is derived by statistically implying such a rating on the basis of rated subordinated or secured bonds or, in the case of loans, the issuer s corporate family rating. Senior rating histories are also adjusted to remove the effect of bond rating changes that are either i) associated with the introduction of Joint Default Analysis for banks and government-related issuers or ii) occurred without concurrent changes in corporate family ratings as a result of the application of Moody s PD rating/lgd assessment methodology. Change in the Default Rate Forecasting Model Forecasts are now based on a model described in two Moody s Special Comments, Introducing Moody s Credit Transition Model, which is targeted to market practitioners and A Cyclical Model of Multiple-Horizon Credit Rating Transitions and Default, which is targeted for econometricians. Both were published in August For the sake of continuity, we continue to report, in Exhibit 25, forecasts based on the previous model, which is described in Predicting Default Rates: A Forecasting Model for Moody's Issuer-Based Default Rates, Moody s Special Comment, August Introduction of Moody's Distress Index Starting from 2007's November Default Report, we introduce Moody's Distressed Index in Exhibit 26. The index is defined as the number of issuers having debt with option-adjusted spreads or CDS spreads greater than 1000 bps divided by the total number of speculative-grade issuers who have an option-adjusted spread or CDS spread. Prior to October 2002, the index is the ratio of distressed issues to the total number of speculative-grade issues as reported in the Merrill Lynch High Yield Index. 2

3 Table of Contents Exhibit Title Page Part I Trailing Twelve Month Default Rates 1 Issuer-Weighted Speculative-Grade Corporate Default Rates 5 2 Issuer-Weighted Corporate Default Rates Ending September Issuer-Weighted Speculative-Grade US Bond/Loan Default Rates 5 4 Issuer-Weighted US Bond/Loan Default Rates Ending September Dollar-Weighted Speculative-Grade Bond Default Rates 5 6 Dollar-Weighted Bond Default Rates Ending September Part II Issuer-Weighted Default Rate Forecasts 7 Global Speculative-Grade Default Rates (Actual and Forecast) 6 8 US Speculative-Grade Default Rates (Actual and Forecast) 6 9 European Speculative-Grade Default Rates (Actual and Forecast) 6 10 Trailing Twelve Month Speculative-Grade Default Rate Baseline Forecasts 7 11 Five-Year Global Speculative-Grade Default Rate Forecasts 7 12 Five-Year US Speculative-Grade Default Rate Forecasts 7 13 Five-Year European Speculative-Grade Default Rate Forecasts 8 14 Five-Year Speculative-Grade Default Rate Baseline Forecasts 8 15 Unemployment Rates (Actual and Forecast) 9 16 High Yield Spread (Actual and Forecast) 9 17 Baseline Forecasts on Unemployment Rates and High Yield Spread 9 18 One-Year Default Rate Forecasts by Industry Actual Global Rating Migration Rates Global Rating Migration Rate Forecasts Rating Drivers (Current) Rating Drivers (One Year Prior) Speculative-Grade Portfolio Default Distributions Investment-Grade Portfolio Default Distributions Discontinued Model-Generated Issuer-Weighted Global Spec-Grade Default Rate Forecasts Distressed Index 13 3

4 Table of Contents Exhibit Title Page Part III Default Experience 27 Defaulted Corporate Issuer Counts Defaulted US Bond/Loan Issuer Counts Default Counts Summary Defaulted Debt Volume Defaulted US Bond/Loan Volume Default Volume Summary Initial Bond Default Events in September Initial Loan Default Events in September Other Credit Events in September Part IV Recovery Experience 36 Trailing Twelve Month Global Defaulted Bond Recovery Rates Trailing Twelve Month Global Defaulted Bond Recovery Rates by Priority Trailing Twelve Month US Loan vs. US Sr. Unsecured Bond Recovery Rates Trailing Twelve Month US Loan vs. US Sr. Unsecured Bond Recovery Rates Summary Moody's Bankrupt Bond Index Moody's Bankrupt Bond Index Summary 16 Part V Rating Changes 42 Trailing Twelve Month Rating Action Rates Trailing Twelve Month Rating Drift Fallen Angels in September Rising Stars in September Part VI Changes/Remarks 46 Changes/Additions to Prior MDRs 18 4

5 Part I: Trailing Twelve Month Default Rates Exhibit 1: Issuer-Weighted Speculative-Grade Corporate Default Rates 8% 6% 4% 2% Exhibit 2: Issuer-Weighted Corporate Default Rates Ending September 2008 Rating Aaa Aa 0.1% 0.2% 0. A 0.3% 0.4% 0.5% Baa Ba 0.3% 0.6% 0. B 1.3% 1.2% 0.6% Caa-C 12.1% 13.4% 2.8% IG 0.2% 0.2% 0.2% SG 2.8% 3.4% 0.7% All 1.1% 1.6% 0.3% Exhibit 3: Issuer-Weighted Speculative-Grade US Bond vs. US Loan Default Rates 8% 6% 4% 2% US Bond US Loan Exhibit 4: Issuer-Weighted US Bond/Loan Default Rates Ending September 2008 Rating US Bond US Loan Aaa Aa 0.2% 0. A 0.4% 0. Baa Ba 0.4% 1.3% B 1.4% 4.5% Caa-C 12.8% 11.8% IG 0.2% 0. SG 3.4% 2.9% All 1.3% 2.4% Exhibit 5: Dollar-Weighted Speculative-Grade Bond Default Rates 8% Exhibit 6: Dollar-Weighted Bond Default Rates Ending September 2008 Rating 6% Aaa Aa A 11.5% 22.3% 0.3% 4% Baa Ba 2.8% 3.4% 0. 2% B 0.9% 0.8% 1.2% Caa-C 6.5% 6.7% 4.2% IG 4.2% 8.1% 0.1% SG 2.7% % All % 0.2% 5

6 Part II: Issuer-Weighted Default Rate Forecasts* Section A: Trailing Twelve Month Speculative-Grade Corporate Default Rate Forecasts Exhibit 7: Global Speculative-Grade Default Rates (Actual and Forecast) 15% 12% Actual Pessimistic Baseline Optimistic 9% 6% 3% Oct '88 Oct '89 Oct '90 Oct '91 Oct '92 Oct '93 Oct '94 Oct '95 Oct '96 Oct '97 Oct '98 Oct '99 Oct '00 Oct '01 Oct '02 Oct '08 Exhibit 8: US Speculative-Grade Default Rates (Actual and Forecast) 15% 12% Actual Pessimistic Baseline Optimistic 9% 6% 3% Oct '88 Oct '89 Oct '90 Oct '91 Oct '92 Oct '93 Oct '94 Oct '95 Oct '96 Oct '97 Oct '98 Oct '99 Oct '00 Oct '01 Oct '02 Oct '08 Exhibit 9: European Speculative-Grade Default Rates (Actual and Forecast) 2 15% Actual Pessimistic Baseline Optimistic 1 5% Jan '99 Jan '00 Jan '01 Jan '02 Jan '03 Jan '04 Jan '05 Jan '06 Jan '07 Jan '08 Jan '09 * See methodology details in Moody's Special Comment Introducing Moody s Credit Transition Model and "A Cyclical Model of Multiple-Horizon Credit Rating Transitions and Default", August

7 Exhibit 10: Trailing Twelve Month Speculative-Grade Default Rate Baseline Forecasts Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Global US Europe 3.3% 3.7% 4.2% 4.7% 5.2% 5.8% 6.1% 6.4% 6.9% % 7.9% % 5.1% 5.6% 6.1% 6.7% 7.1% 7.3% 7.7% 7.7% 8.2% 8.6% 0.9% 1.2% 1.5% 2.1% 2.8% 3.7% 4.4% 4.9% 5.8% 6.1% 6.8% 7.8% Section B: Five-Year Issuer-Weighted Speculative-Grade Default Rate Forecasts Exhibit 11: Five-Year Global Speculative-Grade Default Rates (Actual and Forecast) 6 4 Actual Pessimistic Baseline Optimistic 2 Oct '93 Oct '94 Oct '95 Oct '96 Oct '97 Oct '98 Oct '99 Oct '00 Oct '01 Oct '02 Oct '08 Oct '09 Oct '10 Oct '11 Oct '12 Exhibit 12: Five-Year US Speculative-Grade Default Rates (Actual and Forecast) 6 4 Actual Pessimistic Baseline Optimistic 2 Oct '93 Oct '94 Oct '95 Oct '96 Oct '97 Oct '98 Oct '99 Oct '00 Oct '01 Oct '02 Oct '08 Oct '09 Oct '10 Oct '11 Oct '12 7

8 Exhibit 13: Five-Year European Speculative-Grade Default Rates (Actual and Forecast) 8 6 Actual Pessimistic Baseline Optimistic 4 2 Jan '99 Jan '00 Jan '01 Jan '02 Jan '03 Jan '04 Jan '05 Jan '06 Jan '07 Jan '08 Jan '09 Jan '10 Jan '11 Jan '12 Jan '13 Exhibit 14: Five-Year Speculative-Grade Default Rate Baseline Forecasts Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Global US Europe 10.3% 10.6% 10.5% 11.3% % 12.9% 13.5% 13.9% 14.4% 14.9% % 11.9% % 13.7% 14.4% 14.7% 15.2% 15.7% 16.2% 16.7% 16.9% 6.6% 6.4% 6.3% 5.8% 6.5% 6.6% % 7.8% 8.1% 8.5% 8.9% Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Global US Europe 15.4% 15.6% 15.9% 16.1% 16.4% 16.7% 17.3% 17.6% % 19.1% 19.4% 17.2% 17.4% 17.7% % 18.6% 19.1% 19.4% 19.9% 20.4% 20.9% 21.1% 9.1% 9.4% 9.7% % 11.3% 12.8% 13.1% 13.8% 13.8% 15.3% 15.7% Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Global US Europe 19.9% 20.4% 20.6% % % 22.8% 23.3% 23.7% 24.1% 24.5% 21.6% 22.2% 22.4% 22.8% 23.4% 23.8% 24.3% 24.7% 25.1% 25.5% 25.9% 26.3% % 16.7% 17.3% 17.5% 18.2% 19.2% 19.6% 20.4% 21.1% 21.9% 22.6% Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Global US Europe % % 26.9% 27.5% % 28.9% 29.6% 30.2% 30.7% 26.8% 27.3% % 28.8% 29.5% % 30.9% 31.4% % 22.7% 22.7% 23.4% % 25.6% 26.4% % 28.6% 29.3% 30. Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Global US Europe 31.2% 31.7% 32.3% 32.6% 32.9% 33.4% 33.6% 33.8% 34.1% 34.3% 34.7% 35.1% 32.9% 33.4% % 34.5% % 35.3% 35.6% 35.8% 36.2% 36.5% 30.7% 31.2% 31.8% 32.2% 32.9% 33.9% 34.2% 34.6% 35.1% 35.3% 35.8% 36.6% 8

9 Section C: Macroeconomic Drivers for the Default Rate Forecasts (Baseline forecasts are sourced from Moody's Economy.com and the confidence intervals have been added by MIS.) Exhibit 15: Unemployment Rates (Actual and Forecast) 12% 1 Actual Pessimistic Baseline* Optimistic 8% 6% 4% 2% Oct '88 Oct '91 Oct '94 Oct '97 Oct '00 Oct '09 Oct '12 Exhibit 16: High Yield Spread (bps) (Actual and Forecast) Actual Pessimistic Baseline* Optmistic Jul '94 Jul '97 Jul '00 Jul '03 Jul '06 Jul '09 Jul '12 Exhibit 17: Baseline Forecasts* on Unemployment Rates and High Yield Spread (bps) Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Unemployment HY Spread Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 Unemployment HY Spread * Source: Moody's Economy.com 9

10 Section D: One-Year Corporate Default Rate Forecasts by Industry Exhibit 18: One-Year Default Rate Forecasts by Industry 5% 1 15% 2 25% 3 35% Transportation: Consumer Media: Advertising, Printing & Publishing Hotel, Gaming, & Leisure Media: Broadcasting & Subscription Construction & Building Automotive Retail Consumer goods: non-durable Forest Products & Paper Media: Diversified & Production Consumer goods: durable Services: Business Containers, Packaging, & Glass Transportation: Cargo Capital Equipment Environmental Industries Services: Consumer Chemicals, Plastics, & Rubber Beverage, Food, & Tobacco Healthcare & Pharmaceuticals Metals & Mining Aerospace & Defense High Tech Industries Wholesale Telecommunications FIRE: Finance Energy: Oil & Gas FIRE: Real Estate Energy: Electricity Utilities: Electric Utilities: Oil & Gas Banking Sovereign & Public Finance FIRE: Insurance Utilities: Water US Europe * The Consumer Services industry in Europe has a 1 year default rate of 55.3%. This "industry" consists of only one issuer. 10

11 Section E: One-Year Global Rating Migration Rates (Actual and Forecast) Exhibit 19: Actual Global Rating Migration Rates from Oct 2007 to Sep 2008 (percent) From To Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C WR DEF Aaa Aa Aa Aa A A A Baa Baa Baa Ba Ba Ba B B B Caa Caa Caa Ca-C Exhibit 20: Global Rating Migration Rate Forecasts from Oct 2008 to Sep 2009 (percent) From To Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C WR DEF Aaa Aa Aa Aa A A A Baa Baa Baa Ba Ba Ba B B B Caa Caa Caa Ca-C

12 Section F: Rating Drivers for the Global Default Rate Forecasts Exhibit 21: Rating Drivers (Current) Exhibit 22: Rating Drivers (One Year Prior) Rating Share Last Rating Action Population Up Down Average Duration* Rating Share Last Rating Action Population Up Down Average Duration* Aaa 2.6% 33.5% Aa1 4.1% 43.5% 11.9% 19 Aa2 3.9% 41.2% 26.3% 14 Aa3 9.9% 18.5% 12.4% 8 A1 13.2% 16.3% 10.7% 9 A2 6.9% 35.7% 32.5% 11 A3 6.5% % 11 Baa % 35.3% 12 Baa2 6.6% % 11 Baa % 36.7% 10 Ba1 2.9% 30.9% 28.7% 10 Ba2 3.3% 45.1% 19.6% 7 Ba3 3.6% 46.7% 18.9% 7 B1 4.7% 33.4% 22.2% 7 B2 5.8% 19.6% 24.6% 6 B3 7.7% 8.3% Caa1 4.2% 9.1% 46.4% 4 Caa2 2.1% 3.1% 73.1% 2 Caa3 0.7% % 1 Ca/C 0.3% % 0 Total 100. * measured by number of quarters since last rating change Aaa 2.9% 36.1% Aa1 4.3% 48.1% 10.4% 16 Aa % 16.7% 11 Aa3 10.8% 20.3% 7.9% 6 A1 12.8% % 7 A2 6.6% 41.9% 23.5% 11 A3 5.7% 37.4% 34.1% 11 Baa1 6.1% % 9 Baa2 6.2% 31.8% 36.1% 10 Baa3 5.1% % 9 Ba % 7 Ba2 2.9% 38.6% 23.4% 6 Ba3 3.7% 40.5% 18.5% 5 B1 4.9% 32.2% 20.1% 5 B2 6.7% 17.2% 23.8% 5 B3 8.3% 8.8% 22.7% 4 Caa % 36.8% 3 Caa2 1.5% 2.1% 58.9% 3 Caa3 0.4% Ca/C 0.2% Total 100. * measured by number of quarters since last rating change Section G: Portfolio Default Distributions: Five Year Horizon Exhibit 23: Speculative-Grade Portfolio Default Distributions 12% Exhibit 24: Investment-Grade Portfolio Default Distributions 3 9% 2 6% 3% Baseline Pessmistic Optimistic Y-axis: Probability; X-axis: % of Portfolio Defaulting Baseline Pessimistic Optimistic Y-axis: Probability; X-axis: % of Portfolio Defaulting 12

13 Section H: Discontinued Model-Generated Issuer-Weighted Global Spec-Grade Default Rate Forecasts (included for reference only) Exhibit 25: Panel A - Global Speculative-Grade Default Rates (Actual and Old Model Forecaast) Exhibit 25: Panel B - Old Model-Generated Global Speculative-Grade Default Rate Foreasts 8% Actual Forecast Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 6% 3.1% 3.4% 3.7% 3.7% 3.9% 4.1% 4% Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep % 4.1% 4.1% % 4.9% 2% Oct '08 Apr '09 Section I: Distressed Index Exhibit 26: Distressed Index Dec '96 Dec '97 Dec '98 Dec '99 Dec '00 Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 * Number of Distressed Issuers / Number of Speculative-Grade Issuers Distressed issuers defined as those having debt with OAS or CDS > 1000 bps. Prior to October 2002, however, the index is derived from the ratio of distressed issues to the total number of speculative-grade issues as reported in the Merrill Lynch High Yield Index. 13

14 Part III: Default Experience Exhibit 27: Defaulted Corporate Issuer Counts 20 Exhibit 28: Defaulted US Bond/Loan Issuer Counts 20 US Bond US Loan Apr '04 Apr '05 Apr '04 Apr '05 Exhibit 29: Default Counts Summary Corporate Issuer Counts Bond Issuer Counts Loan Issuer Counts September August July Year-to-date yr monthly avg 5-yr monthl stdev Exhibit 30: Defaulted Debt Volume (US$ Billion) $160 Exhibit 31: Defaulted US Bond/Loan Volume (US$ Billion) $160 US Bond US Loan $120 $120 $80 $80 $40 $40 $0 $0 Apr '04 Apr '05 Apr '04 Apr '05 14

15 Exhibit 32: Default Volume Summary (in millions of US$) Total Debt Volume* Bond Volume* Loan Volume September 2008 August 2008 July 2008 Year-to-date 5yr monthly avg 5yr monthly stdev $150,679 $147,872 $2,052 $150,649 $147,842 $2,052 $30 $30 $0 $1,402 $1,402 $0 $1,201 $1,201 $0 $201 $201 $0 $7,842 $6,290 $729 $3,245 $1,693 $729 $4,597 $4,597 $0 $186,027 $179,358 $3,285 $173,574 $166,906 $3,285 $12,452 $12,452 $0 $4,335 $4,134 $129 $3,839 $3,650 $116 $496 $483 $13 $19,401 $19,054 $347 $19,408 $19,064 $335 $856 $859 $62 Exhibit 33: Initial Bond Default Events in September 2008 Default Ratings** Company Default Event Amount* Specific Industry Domicile At Default 1-Yr Prior HRP Myrtle Beach Operations LLC Chapter 11 $255 Hotel, Gaming, & Leisure United States Caa2 Caa2 Lehman Brothers Bankhaus AG Payment moratorium $2,043 Banking Germany A2 A1 Lehman Brothers Holdings, Inc.*** Chapter 11 $128,182 FIRE: Finance United States A2 A1 Lehman Brothers Holdings, Plc Placed under administration $10 FIRE: Finance United Kingdom A2 A1 Lehman Brothers, Inc.*** Liquidated $0 FIRE: Finance United States B1 Aa3 Motor Coach Industries Int'l, Inc. Prepackaged Chapter 11 $59 Automotive United States C Caa3 Petrozuata Finance Inc. Distressed exchange $755 Energy: Oil & Gas Venezuela Caa1 B3 Washington Mutual Bank Receivership $13,600 Banking United States Baa3 A1 Washington Mutual, Inc. Chapter 11 $5,746 Banking United States Ba2 A2 * Defaulted bonds in millions of US dollars. ** Estimated senior unsecured ratings, which do not necessarily refer to the rating of a particular debt issue. *** Defaulted bonds by Lehman Brother's Inc. are already included in Lehman Brothers Holdings, Inc.'s $128.2 billion of bonds. Lehman's defaulted debt amounts are based on the company's Chapter 11 filing. Exhibit 34: Initial Loan Defaults in September 2008 Ratings** Default Company Default Event Amount* Specific Industry Domicile At Default 1yr_Prior Autocam Corporation Distressed exchange $30 Automotive United States Caa2 B2 * Defaulted loans in millions of US dollars. * * Most senior loan rating. Exhibit 35: Other Credit Events in September 2008 None. 15

16 Part IV: Recovery Data (Recovery rates in exhibits are measured by debt prices taken 30 days after default.) Exhibit 36: Trailing Twelve Month Global Defaulted Bond Recovery Rates (Per $100 Par) $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Exhibit 37: Price Count 5-yr Average 5-yr Stdev Trailing Twelve Month Global Defaulted Bond Recovery Rates by Priority Sr. Secured Sr. Unsecured Subordinated $74.0 $45.8 $ $71.6 $53.2 $34.1 $5.1 $6.7 $8.1 Apr '04 Apr '05 Sr Sec Sr Unsec Subordinated Exhibit 38: Trailing Twelve Month US Loan vs. US Sr. Unsecured Bond Recovery Rates $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 US SU Bond US Loan Exhibit 39: Price Count 5-yr Average 5-yr Stdev Trailing Twelve Month US Loan vs. US Sr. Unsecured Bond Recovery Rates Summary US Loan US Sr. Unsec Bond $64.8 $ $77.0 $51.3 $10.2 $6.8 Apr '04 Apr '05 Exhibit 40: Moody's Bankrupt Bond Index* 3,700 3,400 3,100 2,800 2,500 2,200 1,900 1,600 1,300 1, Exhibit 41: Moody's Bankrupt Bond Index Summary Changes Level 1-Month 3-Month 6-Month 12-Month YTD '07 YTD '06 Index Issuers Issues Total Par* 1, % -29.4% -24.6% -49.2% % 34.3% 56.7% -13. $ % 72.7% -37.4% * Measured in billions of US$ % 2.4% 115.4% -54.2% 11.9% -55.6% -17.7% -52. Apr '04 Apr '05 * MBBI=100 as of December

17 Part V: Rating Changes Exhibit 42: Trailing Twelve Month Rating Action Rates* 3 25% 2 15% Exhibit 43: Trailing Twelve Month Rating Drift* 15% 1 5% -5% -1-15% 1-2 Apr '04 Apr '05 Apr '04 Apr '05 * Rating action rate = (issuer upgrades + issuer downgrades) / rated issuers * Rating drift = (issuer upgrades - issuer downgrades) / rated issuers Exhibit 44: Fallen Angels in September 2008 Issuer Name Specific Industry Domicile Rating From* Rating To* Bradford & Bingley Capital Funding LP Banking United Kingdom Baa1 Ba2 Cedar Brakes I, L.L.C. Energy: Electricity United States Baa3 Ba1 Cedar Brakes II, L.L.C. Energy: Electricity United States Baa3 Ba1 istar Financial Inc. FIRE: Real Estate United States Baa3 Ba1 ITV plc Media: Broadcasting & Subscription United Kingdom Baa3 Ba2 Lehman Brothers Bankhaus AG Banking Germany A2 B3 Lehman Brothers Holdings Inc. FIRE: Finance United States A2 B3 Lehman Brothers Holdings Inc. (London) FIRE: Finance United Kingdom A2 B3 Lehman Brothers Holdings Plc FIRE: Finance United Kingdom A2 B3 Lehman Brothers Treasury Co. B.V. FIRE: Finance Netherlands A2 B3 Lehman Brothers, Inc. FIRE: Finance United States A1 B1 Providian Financial Corporation FIRE: Finance United States Baa3 Ba2 Washington Mutual Bank Banking United States Baa3 Ca Washington Mutual, Inc. Banking United States Baa3 Ba2 * Estimated senior unsecured ratings, which do not necessarily refer to the rating of a particular debt issue. Exhibit 45: Rising Stars in Issuer Name September 2008 Specific Industry Domicile Rating From* Rating To* Americo Life, Inc. FIRE: Insurance United States Ba1 Baa3 Timken Company (The) Capital Equipment United States Ba1 Baa3 * Estimated senior unsecured ratings, which do not necessarily refer to the rating of a particular debt issue. 17

18 Part VI: Changes/Remarks Exhibit 46: Changes/Additions to Prior MDRs None. ALL INFORMATION CONTAINED HEREIN IS COPYRIGHTED IN THE NAME OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"), 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. Copyright 2002 by Moody's Investors Service 99 Church Street, New York, NY All rights reserved. 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 and mechanical error as well as other factors, however, such information is provided "as is" without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstance shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, any such information. The credit ratings, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities 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. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. Pursuant to Section 17(b) of the Securities Act of 1933, MOODY'S 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 have, prior to assignment of any rating, agreed to pay MOODY'S for the appraisal and rating services rendered by it fees ranging from $1,000 to $1,500,