Criteria Corporates Industrials: Key Credit Factors: Criteria For Rating The Global Branded Nondurable Consumer Products Industry

Transcription

1 April 28, 2011 Criteria Corporates Industrials: Key Credit Factors: Criteria For Rating The Global Branded Nondurable Consumer Products Industry Primary Credit Analyst: Jean C Stout, New York (1) ; jean_stout@standardandpoors.com Secondary Contacts: Anna Overton, London (44) ; anna_overton@standardandpoors.com Nicole Delz Lynch, New York (1) ; nicole_lynch@standardandpoors.com Flavia Bedran, Sao Paulo (55) ; flavia_bedran@standardandpoors.com Machiko Amano, Tokyo (81) ; machiko_amano@standardandpoors.com Criteria Officer: Mark Puccia, New York (1) ; mark_puccia@standardandpoors.com Table Of Contents Scope Of The Criteria Summary Of Criteria Update Impact On Outstanding Ratings Effective Date And Transition Methodology Part I--Business Risk Analysis Part II--Financial Risk Analysis Related Research 1

2 Criteria Corporates Industrials: Key Credit Factors: Criteria For Rating The Global Branded Nondurable Consumer Products Industry 1. Standard & Poor's Ratings Services is refining its criteria for the global nondurable branded consumer products industry. We are publishing this article to help market participants better understand the key credit factors in this industry subsector. This article is related to our criteria article, "Principles Of Credit Ratings," published Feb. 16, 2011, on RatingsDirect. Scope Of The Criteria 2. These criteria apply to ratings on issuers in the global nondurable branded consumer products industry. Summary Of Criteria Update 3. This article amends and supersedes "Key Credit Factors: Business And Financial Risks In The Branded Consumer Products Industry," published on Sept. 10, The three newly established key credit factors categories are: Category one factors are in our view the most relevant factors; they ordinarily affect the rating outcome in a meaningful way, and in many instances are critical to our rating conclusions. We view category two factors as being of lesser relevance, but they may in some instances still prove critical. Category three factors may be individually meaningful in a few instances, but ordinarily just shape the company's overall profile in conjunction with the other factors. Impact On Outstanding Ratings 4. We do not expect implementation of these criteria to cause rating changes. Effective Date And Transition 5. These criteria are effective immediately. Methodology 6. Our analytic framework for industrial companies in all sectors, including the global nondurable branded consumer products industry, is divided into two major segments. The first is fundamental business risk analysis. This step forms the basis and provides the industry and business contexts for the second segment of the analysis, a financial risk analysis of the company. Business and financial risk profiles are the two components that form a corporate rating. We employ a matrix approach to combine this into a rating outcome (see Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, published May 27, 2009). Standard & Poors RatingsDirect on the Global Credit Portal April 28,

3 Summary of key credit factors: 7. Our ratings methodology for evaluating the global branded nondurable consumer products industry risk and key credit factors, as is the case for other aspects of our rating analysis, is based on fundamental analysis. The key credit factors used in analyzing branded nondurable consumer products companies globally are listed below in paragraph 8, and divided into three categories. Category one factors are in our view the most relevant factors; they ordinarily affect the rating outcome in a meaningful way, and in many instances are critical to our rating conclusions. We view category two factors as being of lesser relevance, but they may in some instances still prove critical. Category three factors may be individually meaningful in a few instances, but ordinarily just shape the company's overall profile in conjunction with the other factors. 8. We also discuss industry risk factors pertinent to the ratings process in the Industry Risk section of this report. We believe the branded consumer products industry involves less credit risk when compared to many other industries and sectors as explained in Industry Risk and Characteristics below (paragraphs 12 though 22 and in the table.) Category one factors: Market share, including its market position and the ability to sustain or increase share; Strength, breadth, and diversity of brands in the product portfolio; Degree of competition from private label and/or house-branded products within each product category and country market; Product portfolio life cycle, i.e., the balance of well-established products and new product introductions; Degree of operating efficiency, including size and economies of scale, which in turn may translate into greater purchasing power with suppliers; Extent of geographic diversification; and Management's track record of product innovation and brand building, including efficiency and effectiveness of marketing spend. Category two factors: Degree of concentration of manufacturing plants or operating lines and procurement, including high exposure to particular raw materials or suppliers (this may be a critical factor for smaller, or more narrowly focused companies); Customer concentration, (this may be a critical factor for smaller, or more narrowly focused companies); Reach and degree of penetration of distribution network, including costs of developing efficient distribution networks in faster-growing emerging markets; Legal and regulatory environment, including taxation and restrictions on consumption and marketing of certain products; and History of managing product liability, reputational risks, and business interruptions. Category three factors: Ability to manage price volatility and availability of specific raw materials (especially agricultural commodities), as well as volatile energy prices (this may be a critical factor for smaller, or more narrowly focused companies); and Track record in mitigating earnings volatility caused by fluctuations of foreign currency exchange rates either through matching revenues and costs (including funding costs) by currency or through hedging activity. 3

4 Part I--Business Risk Analysis 9. We subdivide business risk into four categories: country and macroeconomic risk, industry risk, competitive position (including management), and profitability/peer comparisons. We evaluate each category, and then determine a score for overall business risk: Excellent, Strong, Satisfactory, Fair, Weak, or Vulnerable. Country risk and macroeconomic factors (economic, political, and social environments) 10. Country risk plays a critical role in determining all ratings on companies in a given country. Country-related risk factors can have a substantial effect on company creditworthiness, both directly and indirectly. 11. While our sovereign credit ratings suggest the general risk local entities face, they may not fully capture the risk applicable to the private sector. We look beyond the sovereign rating to evaluate the specific economic or other country risks that may affect the entity's creditworthiness. Such risks could arise from government policies, legal systems, security concerns, labor issues, and other factors, although there may be various strategies an entity can pursue to try to mitigate certain of these risks. For example, in our liquidity analysis, we consider not only the amount of cash that is deemed surplus, but also where cash is domiciled and restrictions, if any. Industry Risk and Characteristics 12. In establishing a view of the degree of credit risk in a given industry, we find it useful to consider how its profile compares with those of other industries. Industry risk categories are broadly similar across industries, but the effect of these factors can vary markedly among industries (see chart). The key industry factors are scored: High risk (H, red), medium/high risk (M/H, red), medium risk (M, orange), low/medium risk (L/M, green), and low risk (L, green) from a credit risk perspective. Standard & Poors RatingsDirect on the Global Credit Portal April 28,

5 5

6 Standard & Poors RatingsDirect on the Global Credit Portal April 28,

7 13. Broadly speaking, the lower the industry risk, the higher the potential rating on companies in that sector. We have found that those sectors with lower industry risk will tend to have higher business risk profile scores than those sectors with higher industry risk. However, a high industry risk profile does not automatically limit our rating on a company. Companies can differentiate themselves regarding business risk, and may be able to mitigate certain business risks with cautious financial strategies. 14. Industry risk analysis sets the stage for company-specific analysis. Once key country risk and industry risk considerations are identified, our credit analysis process proceeds to a second phase--company-specific analysis. If, for example, we view technology as a critical competitive factor, our analysis typically places greater weight on a company's research and development (R&D) capabilities. If the industry produces a commodity, production cost is of major importance. Our goal is to develop a robust understanding of the company's external operating environment when evaluating its overall business position. Industry analysis focuses on industry prospects, and identifying the competitive factors, risks, and challenges affecting participants in that industry. The degree of business risk facing a company almost always depends on the dynamics of the industry in which it participates. Different industries pose different risks and opportunities for the companies that operate in their sectors. 15. Our evaluation of a company's competitive position identifies those entities that we believe are best positioned to take advantage of these key industry drivers--or to mitigate associated risks more effectively. These should show a competitive advantage, and a stronger business risk profile compared with those companies lacking a strong competitive value proposition or that are more vulnerable to sector risks. When combined, our view of a company's competitive position is shaped by the industry risk of the sector in which it operates, establishing our overall view of the enterprise's business risk profile. 16. We believe the branded nondurable consumer products sector (household and personal care products, packaged/processed foods, tobacco products, and beverages) is less risky than many other industries, including the branded durable consumer products segment (major home appliances/white goods, furniture, home improvement products and small appliances), because many nondurable products are less discretionary and generally more essential. The higher business risk assessment for durable consumer products companies primarily results from the more discretionary nature of demand and the higher ticket price, which historically have made these products more sensitive to economic cycles. Additional factors that render durable branded consumer products companies more vulnerable are narrow product portfolios, relatively high operational leverage, and some seasonal demand patterns, translating into longer working capital cycles. 17. The following are major industry dynamics in the global branded nondurable consumer products sector: Low cyclicality translating into lower volatility of earnings and cash flow; Favorable long-term sociodemographic trends, such as gradually rising incomes in the developed markets, and more rapid income and population growth (including growth in the middle class) in many developing and emerging markets; Brand equity acting as a barrier to entry; Relatively low capital intensity; Low technological risks; Moderate operating leverage; and Limited customer and supplier concentration. However, customer and supplier concentration is more of a risk for smaller, or more narrowly focused consumer products companies. 7

8 18. By contrast, the branded durable consumer products sector exhibits: Higher cyclicality; Higher capital intensity; Higher customer concentration because of the more narrow channels of distribution; and More product and/or geographical concentration. 19. The branded consumer products industry is highly competitive. It has experienced rapid globalization and consolidation during the past decade. This is shown by the increasing scale of large global companies, in line with the consolidation of retailers in mature markets, leading to rising industry bifurcation, with a few very large multinational companies on one side and a number of local market/brand competitors on the other. Besides adding scale, mergers and acquisitions have provided these large, multinational companies entrance into new markets, new product categories and distribution channels. 20. In developed markets, demand for nondiscretionary consumer products is largely recession-resistant and closely tied with population growth and household formation, so high percentage sales gains generally are limited in these regions. Factors influencing demand include innovation, brand loyalty, demographics, household incomes, and price. New products and innovation generally protect a company's profits and deter consumers from trading down to lower-priced value products. However, luxury items and certain other nondurable consumer products (more discretionary and with alternative brand options at various price points such as cosmetics, fragrances and apparel) are much more susceptible to economic cyclicality and fashion risk. 21. We believe developing and emerging markets, particularly in Asia and Latin America, offer considerable growth prospects for branded nondurable consumer products companies. Indeed, economies in both regions are growing quickly and consumer incomes and education levels are rising. In addition, the pervasiveness of media has made consumers world-wide more aware of Western type tastes/styles, products and brands. Growth in the middle-class consumer segment in developing markets, which embraced Western brands, has translated into rising demand for branded nondurable consumer products (that previously were unaffordable). Nondurable consumer products companies leverage their brands' equity to these regions, although sometimes products are reworked, i.e., smaller packaging, to meet these consumers' unique needs. In addition, competition from private-label products is less prevalent in these markets. 22. Most consumer products in mature markets (and increasingly, in developing markets) are distributed through modern retail (i.e., supermarkets and hypermarkets) systems, which are increasingly becoming concentrated. However, some nondurable consumer products (e.g., beer, cosmetics, and spirits) enjoy alternative distribution. As retailers try to differentiate themselves through pricing and through the quality of their store brand offerings, they often negatively affect consumer products companies' ability to pass on cost increases to the consumer, or to earn adequate returns on brand investments especially in times of rising commodity costs and extended weak macroeconomic conditions. Retailers have increasingly taken steps to concentrate suppliers, to gain distribution efficiency and purchasing power, and allocate shelf space to the products generating the highest margins (for retailers). However, not stocking consumer-preferred brands or limiting product variety can hurt a retailer's customer store traffic, reducing sales per customer store visit. Alternative channels (such as convenience, dollar, and club stores that offer a wide range of primarily nondurable consumer products) have emerged in the U.S., providing both branded consumer products companies and consumers an alternate sales outlet. Standard & Poors RatingsDirect on the Global Credit Portal April 28,

9 Company-specific analysis 23. Once key industry and country risk considerations have been identified, including industry-specific key credit factors, the credit analysis proceeds to company-specific analysis. The business risk part of this analysis is divided into three parts: company's competitive position (including market position, diversification, operating efficiency and technology/r&d); management assessment; and profitability (incorporating industry peer group company comparisons). Competitive position 24. We consider the key credit factors outlined above as being important in evaluating the competitive position of branded consumer products companies. The success of a consumer products company depends heavily on its ability to develop--or acquire brands, including perceived quality of product, and loyalty. Industry participants with an established market position, that are well-diversified, focused on attractive markets, and have operating cost advantages can mitigate industry risk sufficiently to achieve more consistent profitability and stronger business risk profiles. We generally expect to see these characteristics in companies we rate in the mid-investment grade or higher categories, given prudent financial policies and leverage, among other things. Market position 25. Our evaluation of market position focuses primarily on the following factors (from most to least important): Ability to maintain or increase its market share and to grow revenues profitably (category 1); Strength of brands, measured through brand loyalty in the face of price changes and economic cycles (category 1); Degree of competition from private-label (nonbranded) products (category 1); Product portfolio characteristics in terms of consumer demand trends, organic growth potential and strategy (category 1); Competitor activity and basis of competition (pricing, quality differentiation or combined product and service offering, category 1); Negotiating power vis-à-vis large retailers in developed markets (category 2); and Reach and degree of penetration of distribution network (category 2). 26. Market share, leadership, and growth. We use company and industry market-share data by industry subsegment, when available, as part of our assessment of a company's competitive position. We compare not only a company's market share, but also volume and pricing changes to those of other competitors, industry trends, and the given company's period-over-period trends. Trends in pricing, including the level and absolute amount of promotion and discounts also are analyzed. We believe the level and extent of promotion and discounts usually is an indication of strength or weakness of a company's competitive position. Monitoring of trends, particularly in volume and pricing, is important in our analysis because demand for even well-established products and brands can erode over time because of changes in consumer preferences, including health and wellness considerations, shifting consumer tastes, and lifestyles. 27. Marketing costs typically absorb 10%-15% of consumer products manufacturers' revenues and are essential for maintaining volumes and pricing power. The success of a consumer brand also depends on the quality of the marketing execution (including advertising and product definition). In our view, companies that closely monitor advertising and marketing budgets to assess their effectiveness in cultivating demand and boosting sales, market share, and brand loyalty, typically are more successful in establishing strong consumer brands. Private-label products are lower priced as compared to branded products because they tend to have little marketing or advertising resources allocated to them, but benefit from the point-of-sale advantage of favorable in-store presentation, because 9

10 they are more profitable for the retailer. Furthermore, private-label products are available--especially in mature markets--at a variety of price points, appealing to more price-conscious consumers, especially during periods of weak economic conditions. We compare a company's marketing expenditures to organic revenue growth, market share evolution and margin progression over time, key aspects of our peer-group analysis. 28. Although brands ensure some sales resilience and adequate access to the consumer through retailers, they do not necessarily guarantee a superior profit margin in mature markets. We believe this is because of the quality and availability of private-label alternatives at lower price points for the majority of, but not all nondurable consumer product categories. In our experience, EBITDA margin strength is an important predictor of cash flow generation in the branded consumer products industry, given the importance of on-going brand investment and support. In our view, branded consumer products industry leaders have demonstrated an ability to maintain or increase market share, by differentiating their products from the consumers' perspective. Creating strong brands through successful marketing execution and regular product innovation or refreshing is critical to achieving this result. Success in increasing market share also depends on the company's distribution network's reach and degree of penetration. Competition on brand/product attributes, rather than competition based on price alone 29. While discounters and private label producers compete primarily on price, branded consumer products manufacturers attempt to compete more on other attributes of value and differentiation, reflected in their brand image. Consumer products companies' ability to compete on nonprice attributes provide some price flexibility to offset pricing pressure from retailers, as well as from competitive products, including private label or store branded products. 30. In environments where commodity prices rise rapidly, it usually has been difficult for the manufacturers to fully pass through cost increases, leading to margin compression in the near term. However, multiple price increases may be possible over time. In addition, large diversified companies are better able to pass through price increases than a one-market, one-product company because larger, more diversified companies typically have greater consumer brand loyalty, which in turn, equates to greater negotiating power vis-à-vis retailers. 31. Branded consumer products for which price competition is the major differentiating factor usually have limited or no pricing flexibility. These companies generally have a less favorable business risk profile than those whose products compete on a mix of attributes. Diversification 32. In analyzing a branded nondurable consumer products company's diversification, we usually consider the following factors (from most to least important) as part of our ratings process: Number and size of brands and brand extensions (category 1); Diversity of product offerings (category 1); Geographic diversification (e.g., global without regional concentration; global/regionally concentrated; national; regional; or local)(category 1); Diversity of manufacturing, as well as sourcing (category 2); and Degree of diversification of customer and distribution channels; usually, the more concentrated the retail distribution, the lower the pricing flexibility (category 2). 33. Diversification helps companies mitigate the risk of stagnating or falling demand for a given product or dependence on a single geographic market or customer. Diversity of manufacturing and/or sourcing locations often results in Standard & Poors RatingsDirect on the Global Credit Portal April 28,

11 uninterrupted product availability in the event of a natural disaster, catastrophic condition, or labor unrest. We view revenue and cash flow derived from a variety of sources as a positive credit factor. We measure that variety as a percentage of exposure by geography, brands, product category, customer, and manufacturing/sourcing locations. We then consider the competitive environment of the markets in which a company operates. This is important to our analysis because of the cyclicality and differing growth prospects of various regional and local markets, even though downturns can be correlated, as experienced in 2008 and Exposure to a mix of emerging, developing and mature markets may offer consumer product companies not only good growth prospects, but also some protection from cyclicality or other causes of revenue decline to the extent that the markets served are sufficiently uncorrelated. We also consider a company's exposures to foreign currency and the degree of mismatch between the currency of operations, sales, and financing. Overall, most branded consumer nondurable and durable products companies are highly focused on a particular product segment or category. Examples include packaged food, nonalcoholic beverages, apparel, and major home appliance manufacturers. While a company's size is often highly correlated with, and an outgrowth of its diversification, branded consumer products companies may not score high in all aspects of diversification. Operating efficiency 34. In analyzing a branded nondurable consumer products company's operating position, we usually consider the following factors (from most to least important) as part of our ratings process: Degree of operating efficiency, fixed compared to variable costs, and the ability to realize scale benefits in product development and production (category 1); and Sensitivity to raw material and energy costs volatility, and the ability to either mitigate or offset exposure to significant commodity prices swings (category 3). 35. Size often translates into greater purchasing power, while economies of scale can improve operating efficiency. Operating efficiency enables re-investment of cost savings into product development and marketing. Operating scale is important because, despite the benefits of brands, virtually all branded consumer products companies face some pricing pressures because their largest market served is typically mature. A company's scale can help enhance its purchasing power for raw materials. The ability to pass through costs of materials is subject to retailer and consumer resistance and is typically limited. Another important factor we consider is the company's ability to adjust costs through internal efficiencies or outsourcing. 36. We also consider risks to a company's mid- to long-term competitive position which might come from "squeezing" its marketing and new product development budgets. This could result in a short-term boost in cash flows, but also lead to a slowdown in future new product launches, which in turn could result in lower sales. In addition, our analysis of operating efficiency considers the company's production capacity utilization levels, as well as the degree of outsourcing employed. Management and strategy 37. See Standard & Poor's "2008 Corporate Criteria: Analytical Methodology," April 15, 2008, for a discussion of how we evaluate managements. Aside from factors we consider when evaluating the management of any company, for branded consumer products companies we focus in particular on management's rationale for and tactics to pursue growth, including the role of acquisitions in its overall strategy. A company's ownership can become more important in our analysis if it is owned by a financial sponsor, which may be focused more on financial returns at the expense of a company's growth. 11

12 Profitability analysis 38. See "2008 Corporate Criteria: Analytical Methodology," April 15, 2008, and "2008 Corporate Criteria: Ratios And Adjustments," April 15, 2008 for how we analyze profitability. 39. Similar to evaluating the profitability for any company, for a branded nondurable consumer products company's profitability, we consider the following factors (from most to least important) as part of our ratings process: Ability to generate consistent profits; Degree of volatility of demand in the company's key markets; and Analysis of historical and prospective operating performance via comparisons to its peers and/or rated companies outside of the industry segment that have similar ratings. 40. We analyze margin levels and return on capital, the sources of profitability, consider whether profits are broad-based or concentrated in certain products or regions, and the degree of volatility of profits. Capital intensity and operating leverage is typically quite low for branded nondurable consumer products manufacturers (in part because of the degree of outsourcing employed), relative to consumer durables, airlines, and autos. Still, branded nondurable consumer product companies, like companies in other sectors generally, potentially are subject to the effects of operating leverage arising from a cyclical downturn which would negatively affect profitability to some degree. 41. Historically, branded nondurable consumer products sector companies generally have had relatively stable profitability and cash flow profiles compared with most other industries, including the branded durable consumer products segment. Part II--Financial Risk Analysis 42. Having evaluated a branded consumer products company's business risk, we next look at several financial categories. The company's business risk profile generally determines the financial risk we expect to see for any rating category. We assess financial risk largely through quantitative means, particularly by using financial ratios. 43. We analyze five risk categories: accounting characteristics; financial governance/policies and risk tolerance; cash flow adequacy; capital structure and leverage; and liquidity/short-term factors. We then determine a score for overall financial risk: Minimal, Modest, Intermediate, Significant, Aggressive, or Highly Leveraged. Accounting characteristics 44. Our accounting adjustments for branded consumer products companies follow our methodologies applied to companies in other industries, and mainly relate to our key adjustments for operating leases and post-retirement obligations, but may also include adjustments for restructurings or other one-time items. Financial governance/policies and risk tolerance 45. Similar to companies in other industries, our evaluation of a branded nondurable consumer products companies' financial strategies and historical results are essential to our understanding management's intent. In instances where we conclude financial policies are overly aggressive and risk tolerance is not prudent, these considerations can be material negative rating factors. We attach great importance in our analysis to management's and/or financial sponsors' philosophies and policies involving financial risk. In evaluating a consumer products company's financial policies, we review management's and owner's (in the case of financial sponsors or other privately held entities) Standard & Poors RatingsDirect on the Global Credit Portal April 28,

13 views on funding dividends, share repurchases, acquisitions, and capital expenditures. Their views on a target capital structure and concrete steps to achieve the target also are important. For example, we review new debt financing, and particularly aggressively leveraged financed deals, and evaluate the burden debt service will place on a company's cash flow and other liquid sources of funding. 46. The extent of derivatives use is also a component of our risk tolerance assessment. Because currency fluctuations, raw material costs, and energy costs, are often key influences on profitability and cash flows for branded consumer products companies, we analyze risk management practices including hedging policies and positions. These companies often use derivatives to manage interest rate, currency, or other risks that arise in their funding strategies. However, some crucial commodities, particularly resin, cannot easily be hedged. 47. We comment below on financial risk factors and characteristics specific to the global branded nondurable consumer products industry. For an explanation of factors and ratios we use in analyzing the financial risk for corporate issuers including branded nondurable consumer product companies please refer to Standard & Poor's "2008 Corporate Criteria: Analytical Methodology", April 15, 2008, and "2008 Corporate Criteria: Ratios And Adjustments", April 15, Capital structure, cash-flow adequacy, and relevant ratios 48. For highly seasonal branded consumer products companies, we focus on average debt balances and calculate these ratios using average total debt. Liquidity/short-term factors 49. See "Standard & Poor s Standardizes Liquidity Descriptors For Global Corporate Issuers," published July, 2, 2010, for purposes of our liquidity analysis. A consumer products company's cash flow cycle and its resulting working capital and liquidity needs can serve, in our view, as an important differentiator of credit quality, especially at the lower end of the rating scale. On average, producers of nondurable consumer products have a much faster working capital turnover (or shorter cash flow cycle) than producers of durable consumer products. Durable consumer products manufacturers tend to have more pronounced seasonal demand peaks than the producers of nondurable consumer products, although exceptions do exist, e.g., lawn and garden nondurable consumer products sector is quite seasonal. The combination of their sensitivity to economic cycles and seasonal sales means that in an economic downturn constrained liquidity can prevent these companies from building up inventory ahead of expected peak demand periods, aggravating an already negative sales environment and also potentially sending negative signals to suppliers and customers. As their earnings weaken, these companies may become unable to meet the liquidity needs of their operations until an eventual upturn in demand. Related Research Standard & Poor s Standardizes Liquidity Descriptors For Global Corporate Issuers," published July, 2, 2010 Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, Corporate Criteria: Analytical Methodology, April 15, Corporate Criteria: Ratios And Adjustments, April 15, 2008 Principles Of Credit Ratings, Feb. 16, 2011 These criteria represent the specific application of fundamental principles that define credit risk and ratings opinions. Their use is determined by issuer- or issue-specific attributes as well as Standard & Poor's Ratings 13

14 Services' assessment of the credit and, if applicable, structural risks for a given issuer or issue rating. Methodology and assumptions may change from time to time as a result of market and economic conditions, issuer- or issue-specific factors, or new empirical evidence that would affect our credit judgment. Standard & Poors RatingsDirect on the Global Credit Portal April 28,

15 Copyright 2011 by Standard & Poors 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