Global Chemical Industry

www. moodys. com Appraisement Alignment Table of Contents: Arbitrary About the Rated Cosmos About This Appraisement Alignment The Key Appraisement Factors Assumptions and Limitations and Appraisement Considerations That are not Covered in the Filigree Conclusion: Arbitrary of the GridIndicated Appraisement Outcomes Appendix A: All-around Chemcial Industry Alignment Agency Filigree Appendix B: Alignment GridIndicated Ratings Appendix C: Observations and Outliers for Filigree Mapping Appendix D: Actinic Industry Overview Appendix E: Key Appraisement Issues over the Boilerplate Appellation 1 3 5 8 Corporate Finance December 2009 Moody’s All-around All-around Actinic Industry Arbitrary This appraisement alignment explains Moody’s admission to assessing acclaim accident for all-around actinic companies. This certificate replaces a antecedent advertisement from February 2006. The filigree for the appraisement alignment is about banausic from the 2006 publication, with accessory updates to accommodate greater accuracy apropos appliance of the grid. We additionally accept provided a clearer anniversary of how ratings in the actinic industry are derived. This advertisement is advised to accommodate a advertence apparatus that can be acclimated aback evaluating acclaim profiles aural the all-around actinic industry, allowance issuers, investors, and another absorbed bazaar participants accept how key qualitative and quantitative accident characteristics are acceptable to affect appraisement outcomes. This alignment does not accommodate an all-embracing assay of all factors that are reflected in Moody’s ratings but should accredit the clairvoyant to accept the qualitative considerations and banking ratios that are best important for ratings in this sector. This abode includes a abundant appraisement filigree and allegorical mapping of anniversary rated aggregation in a adumbrative sample of companies adjoin the factors in the grid. The purpose of the appraisement filigree is to accommodate a advertence apparatus that can be acclimated to almost acclaim profiles aural the actinic industry sector. The filigree provides abbreviated advice for the factors that are about best important in allotment ratings to actinic companies. The filigree is a arbitrary that does not accommodate every appraisement consideration, and our allegorical mapping uses complete after-effects while our ratings alignment additionally considers advanced expectations. As a result, the grid-indicated appraisement is not accepted to bout the complete appraisement of anniversary company. 17 18 19 20 21 26 27 Analyst Contacts: New York 1. 212. 553. 1653 William Reed Vice President -Senior Acclaim Officer John Rogers Chief Vice President James Wilkins Vice President -Senior Analyst Steven Wood Chief Vice President Tokyo 81. 35408. 4100 Noriko Kosaka Vice President -Senior Analyst Analyst Contacts connected on aftermost folio Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry The filigree contains bristles key factors that are important in our assessments for ratings in the all-around actinic sector: 1. Business Contour 2. Admeasurement & Adherence 3. Bulk Position 4. Advantage / Banking Behavior 5. Banking Backbone Anniversary of these factors additionally encompasses a cardinal of sub-factors or metrics, which we explain in detail. Since an issuer’s scoring on a accurate filigree agency about will not bout its all-embracing rating, in the Appendix we accommodate a abrupt altercation of "outliers" – companies whose grid-indicated appraisement for a specific agency differs decidedly from the complete rating. This appraisement alignment is not advised to be an all-embracing altercation of all factors that Moody’s analysts accede in ratings in this sector. We agenda that our assay for ratings in this area covers factors that are accepted beyond all industries (such as ownership, management, liquidity, acknowledged anatomy in the accumulated organization, and accumulated governance) as able-bodied as factors that can be allusive on a aggregation specific basis. Our ratings accede qualitative considerations and factors that do not accommodate themselves to a cellophane presentation in a filigree format. The filigree represents a accommodation amid greater complexity, which would aftereffect in grid-indicated ratings that map added anxiously to complete ratings, and simplicity, which enhances a cellophane presentation of the factors that are best important for ratings in this area best of the time. Because this alignment applies globally, it is necessarily accepted in some respects and is not advised to be an all-embracing and country-specific altercation of all factors that Moody’s analysts accede in every rating. Moody’s appraisement admission considers country-specific differences and at the aforementioned time allows for qualitative appraisal of these factors as able-bodied as another factors that cannot be calmly presented in filigree format. Highlights of this abode include: ? ? ? An overview of our rated universe. A description of the key factors that drive appraisement quality. Comments on the appraisement methodology’s assumptions and limitations, including a altercation on another appraisement considerations that are not included in the grid. The Appendices appearance the appraisement filigree belief on one folio (Appendix A), tables that allegorize the appliance of the alignment filigree to 20 adumbrative rated actinic companies (Appendix B) with allegorical comments on some of the added cogent differences amid the grid-implied appraisement and our complete appraisement (Appendix C), a abrupt industry overview (Appendix D), and a altercation of key appraisement issues for the actinic area over the boilerplate appellation (Appendix E). 2 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance Global Actinic Industry About the Rated Cosmos Moody's ante 107 companies globally in the chemicals and affiliated industries. In the aggregate, these issuers accept about $230 billion of rated debt. Our analogue of the actinic industry includes a array of accompanying industries, such as: ? ? ? ? ? ? ? ? ? ? ? ? Article amoebic and asleep chemicals ? Specialty chemicals ? Plastics, resins and elastomers ? Fertilizers, agronomical chemicals and seeds ? Automated gases ? Architectural and automated coatings ? Flavors and fragrances ? Another aliment accommodation ? Pharmaceutical intermediates ? Organometallics ? Specialty abstracts produced from refinery by-products ? Specialty abstracts that are acclimated in composites ? These companies beforehand and aftermath a advanced array of articles including basal chemicals, specialty materials, and automated gases. Articles ambit from accurate bolt to awful customized articles acclimated in technically ambitious applications. The rated cosmos is beforehand throughout the apple with the accomplished concentrations in the Americas (68), Europe (24) and Middle East/Asia (15). Companies ambit in admeasurement from as ample as $40 billion in revenues to as baby as $100 million. Some may be bunch with abundant accomplishment locations about the globe, while others may accomplish a audible adeptness with calm barter only. The awful airy attributes of the industry as able-bodied as adequately aerial levels of business accident accomplish it added difficult for all but a baddest few companies who are acutely ample and adapted to accomplish and beforehand a Aa rating. Ratings of A3 or aloft are about bound to beyond companies or to abate specialty companies that display aberrant adherence in banking achievement and almost low business risk. The Accumulated Family Appraisement (CFR) or chief apart ratings of the covered issuers ambit from Aa2 to Caa2 with a absorption in the Baa, Ba and B appraisement categories. The boilerplate appraisement for actinic companies is Ba1. The all-inclusive majority of companies – 81 out of 107, about 76%, are in the Baa (27), Ba (26), and B (28) ambit because of the alternating attributes of the industry and our appearance of the industry’s abstinent to aerial business risk. 3 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance Global Actinic Industry Display 1: All-around Actinic Appraisement Distribution 2009 and 2006 Actinic Industry Ratings Distribution 25 Cardinal of Issuers 20 15 10 5 0 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 Ratings 2009 - 107 com panies 2006 - 111 com panies B1 B2 B3 Caa1 Caa2 Caa3 Over the aftermost ten years, in Europe and in the US, a growing cardinal of abstract brand names accept been added to the rated universe. This is attributable in allotment to incumbents' contempo cardinal efforts to focus on their bulk businesses by affairs non-core assets as able-bodied as to a growing absorption from clandestine disinterestedness sponsors. For the purpose of this alignment we accept articular 20 adumbrative issuers out of the companies that we bulk globally. These issuers represent both beforehand brand and abstract brand issuers. The belief acclimated to baddest the 20 focused on the larger, in agreement of revenues, acclaimed issuers. For this acumen the admeasurement of beforehand brand to non-investment brand issuers represented is college than it is in the rated universe. 4 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance Global Actinic Industry Display 2 All-around Actinic Appraisement Alignment Adumbrative Sample Aggregation Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Shin-Etsu Actinic Aggregation Ltd BASF (SE) E. I. du Pont de Nemours and Aggregation Kaneka Corporation Teijin Bound Bayer AG Akzo Nobel N. V. Potash Corporation of Saskatchewan Inc. Appraisement Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Baa1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 Angle Abiding Abiding Abrogating Abiding Abrogating Abiding Abrogating Abiding Abiding Abiding Abiding Abrogating Abiding Complete Abiding Abiding Abiding Abiding Complete Negative Approx Debt millions $189 $21,347 $7,545 $293 $2,143 $20,215 $5,233 $3,082 $2,716 $1,441 $1,971 $23,073 $4,456 $3,390 $3,156 $1,217 $1,904 $4,681 $423 $3,451 LG Chem, Ltd. Eastman Actinic Aggregation Yara International ASA The Dow Actinic Aggregation Braskem SA Celanese Corporation Nalco Aggregation ISP Chemco LLC NOVA Chemicals Aggregation Huntsman Corporation PolyOne Corp Hexion Specialty Chemicals Inc. About This Appraisement Alignment This abode explains the appraisement alignment for actinic companies in six sections, which are abbreviated as follows: 1. Identification of Key Appraisement Factors The filigree in this appraisement alignment focuses on bristles key appraisement factors. These bristles ample factors are added burst bottomward into eleven sub-factors that are appropriately weighted. 5 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry Agency Weighting Sub-Factor Weighting Appraisement Agency Relevant Sub-factor Operational Assortment Artefact Assortment Geographic Assortment Agency 1: Business Contour 9. 09% Commodity/Specialty Bazaar Shares Raw Complete Admission Government Appulse Revenues 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% 9. 09% Agency 2: Admeasurement & Adherence 27. 27% Accommodation of According Admeasurement Adherence of EBITDA Agency 3: Bulk Position 18. 18% EBITDA Allowance (5 yr Avg. ) ROA – EBIT / Avg. Assets (5 yr Avg. ) Agency 4: Advantage / Banking Behavior 18. 18% Accepted Debt / Capital* Debt / EBITDA (5 yr Avg. )* EBITDA/ Absorption Amount Agency 5: Banking Backbone 27. 27% Retained Banknote Flow/Debt (5 yr Avg. )* Chargeless Banknote Breeze (FCF) /Debt (5 yr Avg. * *Where adapted net adapted debt may be acclimated (see altercation of Banknote Balances and Net Debt Considerations) 2. Altitude of the Key Appraisement Factors We explain beneath how the sub-factors for anniversary agency are calculated. We additionally explain the anniversary for appliance specific appraisement metrics, and the agency in which we administer them during the appraisement process. Abundant of the advice acclimated in assessing achievement for the sub-factors is begin in or afflicted appliance the company’s banking statements; others are acquired from observations or stimates by Moody’s analysts. Moody’s ratings are advanced and absorb our expectations of approaching banking and operating performance. We use both complete and projected banking after-effects in the alignment and the appraisement process. Complete after-effects advice us to accept patterns and trends for a company’s achievement as able-bodied as for associate comparison. While the appraisement action includes both complete and advancing results, this certificate makes use of complete abstracts alone to allegorize the appliance of the appraisement methodology. Specifically, unless contrarily stated, the mapping examples in this abode use appear financials for the aftermost three audited budgetary years. All of the quantitative acclaim metrics absorb Moody’s accepted adjustments to assets statement, banknote breeze anniversary and antithesis area amounts for, amid others, asymmetric area accounts, receivable securitization programs, under-funded alimony obligations, and alternating operating leases. Note: For definitions of Moody's best accepted arrangement agreement amuse see Moody’s Basal Definitions for Acclaim Statistics, User’s Guide which can be begin at www. oodys. com in the Research and Ratings directory, in the Special Reports subdirectory (07 June 2007, certificate #78480/SP4467). 3. Mapping Factors to the Appraisement Categories Afterwards anecdotic the abstracts for anniversary factor, the abeyant outcomes for anniversary of the 11 sub-factors are mapped to a ample Moody’s appraisement category. (Aaa, Aa, A, Baa, Ba, B, Caa, Ca). 6 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry 4. Mapping Issuers to the Filigree and Altercation of Filigree Outliers In this area (Appendix C) we accommodate tables assuming how anniversary aggregation maps to grid-indicated ratings for anniversary appraisement sub-factor and factor. The abounding boilerplate of the sub-factor ratings produces a grid-indicated appraisement for anniversary factor. We highlight companies whose grid-indicated achievement on a specific sub-factor is two or added ample appraisement categories college or lower than its complete appraisement and altercate accepted affidavit for such complete outliers and abrogating outliers for a accurate agency or sub-factor. . Assumptions and Limitations and Appraisement Considerations That are not Included in the Filigree This area discusses limitations in the use of the filigree to map adjoin complete ratings, added factors that are not included in the filigree that can be important in chargeless ratings, and limitations and key assumptions that affect to the all-embracing appraisement methodology. 6. Chargeless the All-embracing Grid-Indicated Appraisement To actuate the all-embracing rating, we catechumen anniversary of the 11 agency ratings into a numeric bulk based aloft the calibration below. Aaa 6 Aa 5 A 4 Baa 3 Ba 2 B 1 Caa 0 Ca -1 The afterwards anniversary for anniversary agency is abounding appropriately with the after-effects afresh summed, and disconnected by 11, to aftermath a complete agency score. The complete agency anniversary is afresh mapped aback to an alphanumeric appraisement based on the ranges in the table below. Grid-Indicated Appraisement Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca Complete Agency Anniversary X ? 5. 50 5. 17 ? X ; 5. 50 4. 83 ? X ; 5. 17 4. 50 ? X ; 4. 83 4. 17 ? X ; 4. 50 3. 83 ? X ; 4. 17 3. 0 ? X ; 3. 83 3. 17 ? X ; 3. 50 2. 83 ? X ; 3. 17 2. 50 ? X ; 2. 83 2. 17 ? X ; 2. 50 1. 83 ? X ; 2. 17 1. 50 ? X ; 1. 83 1. 17 ? X ; 1. 5 0. 83 ? X ; 1. 17 0. 50 ? X ; 0. 83 0. 33 ? X ; 0. 50 0. 17 ? X ; 0. 33 0. 0 ? X ; 0. 17 x ; 0. 0 7 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry For example, an issuer with a blended abounding agency anniversary of 1. 5 would accept a Ba2 grid-indicated rating. We acclimated a agnate action to acquire the grid-indicating ratings in the tables anchored in the altercation of anniversary of the bristles ample appraisement factors. The Key Appraisement Factors Moody’s assay of actinic companies focuses on bristles ample factors: ? ? ? ? ? Business Contour Admeasurement & Adherence Bulk Position Advantage / Banking Behavior Banking Backbone Agency 1: Business Contour (9. 09% weight) Why It Matters Business Contour is an important indicator of acclaim quality. The actinic aggregation at Moody's looks at seven factors and aggregates them into a audible anniversary which is afresh mapped to a specific rating. The aboriginal three factors focus on diversity. Diversity, whether it be operational, product, or geographic, is a key basic of business position that, can advice abate the animation in banking achievement adapted of the actinic sector. 1. Operational Assortment Audible armpit locations, as an indicator of operational diversity, can betrayal a aggregation to the anticipation of hasty bottomward times. We agenda that this agency is acutely important. Area a aggregation operates a audible site, the accident of that audible armpit declining is accounted to accept such a adverse appulse on the business archetypal that alike the anticipation of armpit allowance or business abeyance allowance will not accommodate acceptable acknowledgment adjoin the abeyant furnishings of a axiological abortion of the site. 2. Assorted Artefact Ambit Assorted artefact ambit can advice axis animation in banknote flows to the admeasurement that altered articles can accept assorted appraisement dynamics. 3. Geographic Diversity Geographic assortment can additionally be benign as a aggregation with assorted bulb sites can still be abnormally afflicted by both bread-and-butter and acclimate accompanying events. 4. Article Adjoin Bulk Added Articles In the actinic area article players are about added airy in agreement of banknote breeze bearing admitting the bulk added producers about aftermath added abiding banknote flows. At times, today's bulk added producers can become added commodity-like in their banknote breeze breeding capabilities, so we will anxiously appraise area a artefact or accumulation of articles may be in its action cycle. 5. Market Allotment or Altered Aggressive Advantage Ample bazaar allotment suggests a acceptable business position with the accurate adeptness to acclimate the airy bazaar altitude in the actinic cycle. In some instances companies with ample bazaar shares will acclimatize their assembly volumes to advice antithesis the accumulation and appeal dynamics in the markets served as a agency to antithesis artefact pricing. Bazaar allotment that is able by apparent and altered licensing restrictions can additionally be a strong, complete contributor to abiding banknote flows and performance. 8 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry 6. Acknowledgment to Airy Raw Abstracts Raw complete exposures greater than 33% in agreement of bulk of appurtenances sold, for example, can about aftereffect in affecting swings in banknote flow. This is abnormally accurate in times of supply/demand imbalances, which can actualize shortages in raw abstracts and amplify raw complete bulk movements. Companies with the adeptness and anticipation to locate their assembly accessories in areas of the apple area they can anniversary from continued appellation anchored riced raw abstracts accept a audible advantage over companies that are accountable to the vagaries of the raw complete atom markets. 7. Appulse of Government Adjustment The final agency we appraise is the complete or abrogating appulse of government regulation. This agency addresses the complete or abrogating role that government adjustment or action may accept on an alone aggregation or area of the actinic industry. For abounding companies, the appulse of government adjustment may be neutral. For some sectors, such as the booze area in the U. S. the complete actuality of the area is a action of government allowable policy. In still another instances, the government has approved to ban the use of assertive articles – such as MTBE – in some markets. This agency is additionally acutely important and we will, as explained below, ample it aback assessing companies for whom government regulations/mandates are, essentially, the sole disciplinarian for the business model. How We Admeasurement it for the Filigree The 7 Business Contour belief are alloyed into an appraisal score, as follows: Business Contour Appraisal Anniversary This anniversary is fabricated up of seven criteria. To anniversary we accredit a detached afterwards value. The ethics beyond the belief ambit from (-2) to 2 with abounding advancing in at 0 or 1. Moody's analysts may use a modifier of 0. 5 beyond the seven belief to clarify the anniversary about to another companies in the industry. These ethics are totaled into a anniversary which is afresh mapped to a appraisement class in the afterward manner: Aaa Aa A Baa Ba B Caa Ca = = = = = = = = > 6. 0 > 4. 5 to < 6. 0 > 3. 5 to < 4. 5 > 2. 5 to < 3. 5 > 1. 5 to < 2. 5 > 0. 5 to < 1. 5 > - 0. 5 to < 0. 5 < - 0. 5 ? Operational assortment – We calculation the cardinal of detached operating plants that accept a globally aggressive scale. A (-2) is assigned for 1 or 2 plants, a 0 is assigned for 2 - 8 plants and a 1 is assigned if there are greater than 8 ample accomplishment locations. This is one of three factors with a abrogating anniversary accustomed the accent we accredit to operational diversity. A sole armpit artlessly leaves the aggregation with too abounding eggs in one basket. Artefact assortment – We accredit a 0 if a majority of banknote breeze is generated from 1-2 key artefact ambit and a 1 if a aggregation relies on 3 or added artefact ambit or artefact categories. Geographic assortment – We accredit a 0 if a majority of the assembly assets are primarily in a audible geographic arena and accredit a 1 if assembly assets are in assorted regions Article adjoin bulk added articles – We accredit a 0 if a majority of sales are primarily article articles and accredit a 1 if we appearance articles as abacus audible altered added value. Quantitative factors such as adherence of EBITDA and EBITDA margins are acclimated afterwards as accession basic in the altitude of this important factor. ? ? ? 9 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Rating Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry ? Bazaar allotment – We accredit a 0 if a bazaar allotment is inconsequential about to the abutting three bigger competitors and accredit a 1 if a area or aggregation has ample allotment or few complete competitors. We would accredit a 2 if the aggregation has a altered aggressive advantage (patents, know-how, etc. ) that could abate antagonism significantly. Bazaar allotment assessments are apprenticed by the analogue of the markets served. Definitions should be advanced abundant to represent accepted another products. Raw complete admission – We accredit a (-1) or (-2) if we appraisal acknowledgment to airy raw complete costs at greater than 33% of costs of appurtenances sold. We accredit a 0 if acknowledgment to airy raw abstracts costs is from 10% to 33% of costs of acceptable sold. We accredit a 1 if the acknowledgment to raw abstracts is beneath than 10% and a 2 if the aggregation has a material, demonstrable, abiding feedstock advantage. Accustomed the accent of raw complete inputs to ultimate banknote flows this metric is awfully important. It is one of three metrics with a attainable abrogating value. Accustomed the accent of this metric, the bulk can go as aerial as 2. Impact of authoritative regulations or behavior – For companies accountable to cogent government regulations or acute to changes in government policies, we accredit a anniversary absorption the complete or abrogating appulse of these regulations/policies on the companies' continued appellation banking performance. Best of the companies in this industry will anniversary a 0. Booze producers in the US would be assigned a (-1) because of their assurance on government adjustment to actualize appeal for the product. Companies that would be absolutely afflicted over the continued appellation by government regulations could be assigned a 1. ? The accent of the business contour anniversary is accent by the actuality that, in assertive cases, it can outweigh all another factors in the methodology, materially blurred ratings. The two best arresting examples are: operations bound to a audible armpit and a business archetypal whose success is awful or alone abased on government accomplishments or policies. Agency 1: Business Contour (9. 09%) Weight a) Business Position Appraisal 9. 09% Aaa ? 6. 0 Aa 4. 5 - 6. 0 A 3. 5 - 4. 5 Baa 2. 5 - 3. 5 Ba 1. 5 - 2. 5 B 0. 5 - 1. 5 Caa - 0. 5 - 0. 5 Ca ; - 0. 5 A blueprint that illustrates filigree mapping after-effects for Agency 1 and a altercation of outliers for companies in the sample is included in Appendix C. Agency 2: Admeasurement & Adherence (27. 27% weight) Why It Matters This agency includes detached quantitative measures that attack to admeasurement size, assortment and the adherence of a business model. Ample revenues accumulated with ample accommodation as able-bodied as a continued history of abiding achievement beforehand acceptable business positions that accept been and will be able to demonstrably acclimate the vagaries of basic and bread-and-butter cycles. Size Size can beforehand the adeptness to anniversary from abundant bare economies of calibration both in assembly and admission to raw abstracts on a adopted basis. In addition, admeasurement suggests the adeptness to anniversary ample barter globally — an important aspect as abounding barter footfall up efforts to abate the cardinal of their suppliers. Admeasurement additionally tends to favor the companies that sovereigns, government accompanying entities, and another ample companies accept as their collective adventure ally or technology suppliers of chemicals that add important bulk added backdrop to customer’s products. Cardinal of Divisions The attendance of assorted ample accommodation about signals a counterbalanced adapted artefact portfolio and, by extension, added abiding banknote flows. Companies with aerial artefact absorption may display added airy banknote flows and may be added attainable to one time contest that can be damaging to acclaim quality. Assorted accommodation additionally accommodate for detached assets that can be awash as all-important to accommodate alternating liquidity. Beyond companies 10 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance Global Actinic Industry with abounding accommodation can, for example, advertise weaker assuming or non-core segments, with the auction gain accouterment allotment for debt abridgement or beforehand in another segments. Adherence of Business Archetypal (Stability of EBITDA) Accustomed the assortment of this industry, we attack to barometer the acceptable akin of animation in antithesis and banknote flow. Companies with animated levels of animation in antithesis and banknote breeze will crave bigger clamminess and added able-bodied banking metrics, on average, to atone for ambiguity over the consequence and continuance of abeyant downturns. We assay the animation of EBITDA over a continued aeon of time (7-10 years, aback the abstracts is available) to get an admiration of the accepted animation of the aggregation about to its aeon in the industry. While there are abounding problems associated with the use of EBITDA as a admeasurement of either advantage or banknote flow, EBITDA is about beneath afflicted by amazing items, fluctuations in alive capital, and basic spending on new accommodation than another measures of banknote flow. It additionally allows us to abolish the abeyant appulse from differences in basic acuteness beyond the industry. To the admeasurement that a company's EBITDA may accommodate abnormal items, or items that we adjudicator to be one-time, the appear abstracts may be adapted to beforehand the affection of the assay and appropriately get a bigger appearance of the accurate animation of the aggregation about to its aeon in the industry. Aback companies accept completed a transformational accretion or divestiture, or if seven years of abstracts is contrarily unavailable, we appraisal this metric based on a allegory to another rated companies and attack to acclimatize for differences in artefact or geographic mix, as able-bodied as the appulse of feedstock advantages or disadvantages. A transforming transaction is about authentic as the accretion or denial of assets that comprise added that 1/3 of the pre-transaction EBITDA. While we admeasurement the accomplished 7-10 years of data, we would accent that our ratings are a advanced appearance abreast by complete volatility. To the admeasurement we accept that approaching achievement adeptness aberrate from complete patterns, we will adapt this factor. How We Admeasurement it for the Filigree Admeasurement Abstinent by Revenues We use the best contempo anniversary revenues or latest 12 ages appear revenues. The accepted year's revenues acutely can be either chaste or abstract accountable to area the aggregation is in the article bulk cycle. While the article bulk aeon may be altered for assorted companies, this metric measures all companies, by and large, at the aforementioned point in the bread-and-butter cycle. For companies whose revenues are on the bound amid two ratings categories, the analyst would accede the point in the article bulk aeon at which the altitude is taken and the appraisal of approaching revenues. Accommodation with Revenues of According About Size This agency can be captured from banking statements. We use the articulation advice begin in the best contempo anniversary abode on a latest four division basis. We are attempting afresh to abduction both assortment as able-bodied as scale. The analyst may acclimatize articulation revenues manually to acclimatize for non-ordinary items or clandestine articulation advice provided by management. For companies whose bounded revenues are airy and accountable to cycles, the analyst would afresh accede the point in the appraisement aeon at which the altitude is taken. Our focus is to admeasurement assortment of acquirement streams. For a aggregation with $1 billion in revenues – if all revenues appear from a sole division/product it would map to a B. If there were four detached accommodation with $250 actor in revenues anniversary (essentially according in size) it would map to a Baa. For a aggregation with $10 billion in revenues with four detached divisions/products, if two accommodation had $3 billion in revenues anniversary and 2 accommodation had $2 billion in revenues anniversary – it would still be advised to be almost assorted and agree to a Baa. 1 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry Adherence of EBITDA This agency is abstinent by the normalized accepted absurdity of the company's EBITDA as bent by a atomic squares corruption on seven to ten years of data. We beforehand accepted absurdity rather than accepted aberration as it is abundant bigger at adapted amid article and specialty actinic companies. Standard aberration is a changeless admeasurement that cannot acutely differentiate amid a abiding aggregation growing over time and a article aggregation whose animation is induced by changes in its banknote margins. Accepted absurdity is a statistical admeasurement of the aberration amid the company's complete achievement adjoin a abstract band fatigued through the abstracts (hence accustomed beforehand in EBITDA over 7-10 years should not accept a abrogating appulse on this metric). The normalized accepted absurdity is acquired by adding the accepted absurdity acquired from a beeline corruption by the boilerplate EBITDA over the aeon analyzed. This allows us to analyze the accepted absurdity of ample companies to abundant abate companies This altitude is advised to abduction two types of stability: For abate companies – The adherence of business or businesses about to another companies in the industry. The complete admeasurement of a aggregation is not considered. For beyond companies – A complete ample or assorted article aggregation may display added adherence based on the cardinal of businesses in its portfolio, abnormally if the antithesis of their alone businesses are not activated (i. e. , all businesses don't go into a abatement or upturn at the aforementioned time). In statistical terms, if the covariance of the company’s businesses is low, the company's achievement should be added abiding although it may be an inherently alternating article actinic business. Companies with a normalized connected absurdity aloft 40% (which maps to the Caa category) are best accepted for companies with complete low or abrogating EBITDA at the basal of a downturn. Agency 2: Admeasurement & Adherence (27. 27%) Weight a) Acquirement (Billions of US$) b) # of Accommodation of According Admeasurement c) Adherence of EBITDA 9. 09% 9. 09% 9. 09% Aaa ? $50 8 ; 2% Aa $20 - $50 6 to 7 2% - 6% A $10 - $20 5 6% - 12% Baa $5 - $10 4 12% - 20% Ba $1 - $5 2 or 3 20% - 30% B $. 2 - $1 1 or 2 30% - 40% Caa $. 1 - $. 2 1 40% - 60% Ca ; $. 1 0. 5 ? 60. 0% A blueprint that illustrates filigree mapping after-effects for Agency 2 and a altercation of outliers for companies in the sample is included in Appendix C. Agency 3: Bulk Position (18. 18% weight) Why It Matters About bulk position is a analytic success agency for a actinic aggregation because, in a downturn, (either alternating or economic) prices about abatement to the point area alone companies with aboriginal and added quartile banknote costs accomplish allusive banknote flow. Operating bulk positions are a action of belief that accommodate size, admission to low bulk raw complete inputs, area of assets, action rates, and basic invested. Further, with low levels of banking leverage, low bulk producers are about bigger positioned to beat competitors. Low bulk producers, with low leverage, are bigger able to survive in a abatement and are additionally bigger positioned to abound aback opportunities arise. A company's banknote costs and its position on the industry bulk curve, as able-bodied as the all-embracing appearance of the industry bulk curve, are all admired information. However, accurate banknote bulk ambit data, while useful, is about proprietary or may be the acreage of assorted consultants and difficult to verify. 12 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry Comparisons beyond the advanced array of article and specialty actinic companies accomplish it difficult to await on about or complete costs for baronial companies. We use two measures in accession to advice provided by companies to appraise bulk positions: ? ? EBITDA Allowance Acknowledgment on Boilerplate Assets How We Admeasurement it for the Filigree EBITDA Allowance This agency is acclimated in allotment to barometer the affection of the appraisement adeptness a aggregation has and is acceptable to achieve. It is abstinent appliance EBITDA, which includes alternating "other" assets and excludes non-recurring "other" assets and one time charges. This factor, forth with several others, is an important admeasurement of a company's advantage in assorted bread-and-butter scenarios. We use the accomplished three years' complete after-effects forth with our apprehension for the abutting two years, and to accede the boilerplate as able-bodied as the aerial and low points. For allegorical purposes the altitude acclimated in the aggregation examples herein is based on an boilerplate of the accomplished three years' EBITDA margin. The best of EBITDA, adjoin EBIT, is apprenticed in allotment by the abounding and assorted abrasion polices acclimated globally and the charge for allegory amid regions. Nonetheless, we admit the weaknesses of EBITDA, discussed below, and analysts aural regions will additionally appraise EBIT margins as well. Accession acumen for the use of EBITDA is the aterial aberration in basic acuteness aural sub-sectors of the actinic industry. The basic acuteness of a ample article aggregation can be complete altered from a abate specialty player. The use of EBITDA – as adjoin to EBIT – has a disadvantage in that EBITDA fails to abode the basic acuteness of the actinic industry effectively. Acutely an important indicator of a company's adeptness to accomplish operating accumulation should be adjourned afterwards the costs of bulb aliment and accommodation expansion, as represented by its anniversary abrasion charges. Experience indicates that while a actinic company's basic spending about swings with aloft projects, it will about charge to absorb its abrasion over time as it maintains and develops new facilities. We attack to abduction the aftereffect of this basic acuteness in our use of chargeless banknote breeze metrics in the banking backbone appraisement agency discussion. Acknowledgment on Boilerplate Assets This is a able admeasurement of a company's adeptness to accomplish a constant and allusive acknowledgment from its asset base. This metric accurately takes into anniversary the basic accelerated attributes of the industry. This is additionally a five-year boilerplate altitude appliance the accomplished three years of complete after-effects forth with our apprehension for the abutting two years. We use complete assets, beneath banknote and abbreviate appellation investments rather than absolute assets to accommodate a added allusive admeasurement for the cosmos of abstract brand companies. Agency 3: Bulk Position (18. 18%) Weight a) EBITDA Allowance b) ROA - EBIT / Assets 9. 09% 9. 09% Aaa ? 30% ? 25% Aa 20% - 30% 15% - 25% A 15% - 20% 10% - 15% Baa 10% - 15% 7% - 10% Ba 8% - 10% 4% - 7% B 4% - 8% 2% - 4% Caa 1% - 4% 0. 5% - 2% Ca < 1% < 0. 5% A blueprint that illustrates filigree mapping after-effects for Agency 3 and a altercation of outliers for companies in the sample is included in Appendix C. 13 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry Agency 4: Advantage / Banking Behavior (18. 18% weight) Why It Matters Management's alertness to enhance actor bulk via debt financed acquisitions and/or allotment repurchases, is acceptable to access acclaim risk. The actinic industry is decidedly attainable accustomed its airy nature. We apprentice about banking behavior through a altercation with administration that includes academic scenarios. Such affairs about appraise management's alertness to amplitude its antithesis area and/or banking flexibility. The academic situations about chronicle to acquisitions or allotment repurchase appetites. Concerning acquisitions, discussions about focus on admeasurement and on the aggregate of debt and/or disinterestedness that will be acclimated to armamentarium a beforehand initiative. Accession key affair is management's admission to managing banking adaptability through a ambit of cycles. Specifically we attending for an admission that emphasizes accommodation for angular times such that able banknote flows, aback available, are acclimated to abate debt. Altitude of advantage and banking behavior is based on two altered estimates of leverage: accepted debt to capitalization, and debt to EBITDA. We accept that the bulk of advantage with which administration operates is a best and a absolute aftereffect of a company's banking strategy. Issuers, decidedly those in the beforehand brand and aerial Ba appraisement categories, about actively administer to these ratios. Certainly these ratios, abnormally debt to EBITDA, are acclimated by providers of basic in the anatomy of specific agreement tests. Debt to basic is a simple way to analyze the basic anatomy of companies operating aural an industry, and managements about affirmation to administer to it. This metric is additionally a way to appraise management's alertness to abound via debt financed acquisitions. The debt to EBITDA arrangement is a admeasurement that balances the debt to assets arrangement with a altitude of a company's adeptness to accomplish EBITDA both in times of aiguille appraisement and in times of stress. We accept these two metrics accommodate acumen into the company's banking policies, including its altruism for debt and the adeptness of the aggregation to ride out the highs and low of a cycle. How We Admeasurement it for the Filigree Debt to Basic This agency can be calmly captured from banking statements appliance the best contempo anniversary or anniversary debt and disinterestedness balances (incorporating our accepted adjustments). There are absolutely situations area this metric becomes beneath advantageous — decidedly in the case of LBOs or spinouts wherein book disinterestedness is low or nonexistent. In these instances this metric could be accustomed bargain weight. In the accident that a company's book disinterestedness is acutely low and the banal is about traded, the analyst may use the bazaar basic of the aggregation in abode of book disinterestedness in this ratio. While bazaar basic has its own weaknesses and can be complete volatile, this admission can be of some value. Debt to EBITDA For this admeasurement we use a five-year boilerplate of the anniversary debt and EBITDA balances as apparent on the banking statements. We attending aback three years and use estimates to accomplish assumptions for two years action forward. Agency 4: Advantage / Banking Behavior (18. 18%) * Weight a) Accepted Debt / Basic b) Debt / EBITDA 9. 09% 9. 09% Aaa lt; 15% < . 5x Aa 15% - 25% . 5x - 1. 5x A 25% - 35% 1. 5x - 2. 25x Baa 35% - 50% 2. 25x - 3x Ba 50% - 70% 3x - 4x B 70% - 80% 4x - 6x Caa 80% - 95% 6x - 8x Ca ? 95% ? 8x * Area adapted net adapted debt may be acclimated (see altercation of Banknote Balances and Net Debt Considerations) 14 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry A blueprint that illustrates filigree mapping after-effects for Agency 4 and a altercation of outliers for companies in the sample is included in Appendix C. Agency 5: Banking Backbone (27. 7% weight) Why It Matters The three key indicators of banking backbone are 1) Absorption Coverage, 2) Retained Banknote Breeze to Debt, and 3) Chargeless Banknote Breeze to Debt. All of these metrics are averaged over five-year periods to abode the airy attributes of the industry. Absorption coverage: Absorption advantage can be decidedly allusive for abstract brand companies. This is abnormally accurate if the absorption bulk ambiance is in a aeon of change — such as the clearing from lower ante to college ante — and an issuer is adverse the charge to refinance debt that is advancing maturity. It is a beneath important metric for higher-rated companies. The absolute two metrics are advantageous beyond the appraisement spectrum and chronicle to the bulk of banknote breeze attainable to awning assorted scenarios of both operating needs and costs needs. ? ? Operating needs accommodate aloft items such as alive basic and basic spending. Costs needs refers to the appulse of assets and the "free" banknote afresh attainable to anniversary debt. As discussed above, the use of EBITDA (as adjoin to EBIT) in the absorption advantage arrangement is important for companies in the actinic industry and the accommodation to use it is a action of the charge to accomplish the arrangement added commensurable globally. Retained Banknote Breeze and Chargeless Banknote Flow: The banknote breeze metrics we use admeasurement two altered levels of banknote flow: retained banknote breeze and chargeless banknote breeze and their arrangement to complete adapted debt. Retained banknote breeze is a broader admeasurement of banking adaptability than chargeless banknote breeze as it excludes the abeyant 'noise' created by changes in alive basic and abnormal basic spending programs. This is a attainable admeasurement accustomed the animation and the aberration in basic acuteness aural the actinic sector. As with another factors in which debt is circuitous we can attending at these banknote breeze metrics in two agency — as a allotment of both debt and of net debt (net of banknote balances). We use net debt for companies at which it is either a stated, abiding action to authority complete banknote balances or for which there may be altered scenarios such as contempo asset sales whereby banknote may be adapted for use in debt abridgement efforts. In some specific instances we may use a net debt denominator for the chargeless banknote breeze metric as well. A added abundant altercation of our angle on banknote balances appears below. Free banknote breeze is, in abounding instances, one of the best important and reliable measures of banking backbone and flexibility. This metric reflects a company's primary antecedent of clamminess as it anon speaks to management's adeptness to anniversary its debt accountability afterwards because both its operating and banking commitments to shareholders. In this metric we about analyze area basic spending programs may be abnormally ample and/or risky. At times, programs can accept a absolute appulse on ratings because of the admeasurement of bulk that may be circuitous as able-bodied as the risks of active the affairs on time and on budget. If, for example, a ample bulk of basic is spent on new greenfield accommodation and we accept that such accommodation is actuality added at a time aback artefact prices are low (i. e. , there is a abridgement of an able acknowledgment on capital) the ratings may be abnormally affected. There is additionally the accident that advancing operating banknote bulk allowances aloft action achievement are altered than expected. 15 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry How We Admeasurement it for the Grid Interest advantage This metric is a aboveboard attending at EBITDA (adjusted for non-recurring another assets and ancient charges) to gross absorption amount (including capitalized interest). This is a five-year measure. Banknote Breeze to Debt ? Retained Banknote Breeze to Debt – Authentic as funds from operations (FFO) bare dividends, as a allotment of complete debt. This is a five-year measure. Chargeless Banknote Breeze to Debt – Authentic as banknote breeze from operations (by its attributes operating banknote breeze is bent afterwards demography into anniversary alive capital) bare basic spending and dividends, as a allotment of complete debt. This is a five-year measure. ? Banknote Balances and Net Debt Considerations Typically, analysts admission the use of banknote balances and the use of banknote in "net debt" calculations in a bourgeois fashion. As a accepted aphorism we would not about accede banknote on the antithesis area as a accurate account to adapted complete debt in for the purpose of arrangement analysis. Affidavit that we would not attending at banknote on the antithesis area as changeable for the debt accommodate affair that: ? the banknote is calmly acclimated for another purposes and debt abridgement is alone counted hen debt is assuredly bargain in some instances banknote is absolutely bare to armamentarium the circadian operations of the issuer the banknote is "stranded' across and accountable to complete taxes such that the accurate banknote antithesis is materially lower than represented in the banking statements there may be another claims on the banknote for restructuring efforts or bequest liabilities. ? ? ? There are, however, examples area our assay for actinic companies incorporates banknote balances as accouterment a admeasurement of account to adapted complete debt balances. Exceptions to the aloft analytic approach, for which we accord acclaim for banknote balances include: ? he specific refunding of abreast appellation debt maturities wherein administration borrows in beforehand to prefund a abreast appellation maturity. banknote is captivated briefly for legal, tax or another purposes and the aggregation has about declared its ambition to abate debt already the acting aeon has ended. ? Another instances, about alone for ample companies, accommodate situations in which administration has a history of advancement complete levels of banknote on the antithesis sheet, it has about declared its ambition not to accompany largedebt financed acquisitions or allotment repurchases, and banknote is attainable after allusive accident to taxes. In Europe and Latin America, we additionally about beam that companies are added accommodating to beforehand college banknote balances that may sometimes be affiliated to tax considerations or added broadly reflect a added bourgeois appearance of banking policies. Because alone gross debt may not reflect the complete banking backbone of these companies and we may adopt in this case to focus on net debt. In these cases, however, we abduction the apprehension that these banknote balances can be asleep at atomic at book bulk and after tax costs. Factor 5: Banking Backbone (27. 27%) * Weight a) EBITDA / Absorption Amount b) Retained Banknote Breeze / Debt c) Chargeless Banknote Breeze / Debt 9. 09% 9. 09% 9. 09% Aaa ? 20x ? 65% ? 40% Aa 15x - 20x 45% - 65% 25% - 40% A 10x - 15x 30% - 45% 15% - 25% Baa 5x - 10x 20% - 30% 8% - 15% Ba 2x - 5x 10% - 20% 4% - 8% B 1x - 2x 5% - 10% . 5% - 4% Caa 0. 5x - 1x 1% - 5% 0% - . 5% Ca ; 0. 5x ; 1% ; 0% * Area adapted net adapted debt may be acclimated (see altercation Banknote Balances and Net Debt Considerations) 16 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry A blueprint that illustrates filigree mapping after-effects for Agency 5 and a altercation of outliers for companies in the sample is included in Appendix C. Assumptions, Limitations and Appraisement Considerations not Covered in the Filigree The appraisement alignment filigree incorporates a accommodation amid artlessness that enhances accuracy and greater complication that would accredit the filigree to map added anxiously to complete ratings. The bristles appraisement factors in the filigree do not aggregate an all-embracing assay of all of the considerations that are important for ratings of all-around actinic companies. In allotment metrics for this appraisement alignment grid, we did not accommodate assertive important factors that are accepted to all companies in any industry, such as the affection and acquaintance of management, assessments of accumulated babyminding and the affection of banking advertisement and advice disclosure. The appraisal of these factors can be awful abstract and baronial them by appraisement class in a filigree would, in some cases, beforehand too abundant attention in the about baronial of accurate issuers adjoin all another issuers that are rated in assorted industry sectors. Ratings may accommodate added factors that are difficult to quantify or that alone accept a allusive aftereffect in adapted acclaim affection in some cases. Such factors accommodate authoritative and action accident as able-bodied as changes in end use appeal such that today’s specialty actinic becomes tomorrow’s commodity. While these are important considerations, it is not attainable to absolutely accurate these in the appraisement alignment filigree after authoritative the filigree badly circuitous and beneath transparent. Ratings may additionally reflect affairs in which the weighting of a accurate agency or qualitative affair will be altered from the weighting or aftereffect adapted by the grid. For example, the accent of the business contour anniversary is accent by the actuality that, in assertive cases, it can outweigh all another factors in the alignment materially, blurred ratings significantly. The three best arresting examples are: ? ? operations bound to a audible site, and a business archetypal whose success is awful abased on government accomplishments or policies. a aggregation with cogent action accompanying to either ecology or artefact accountability issues. This aberration in weighting as a appraisement appliance can additionally administer to factors that we chose not to attack to represent in the grid. For example, clamminess is a appraisement appliance that can sometimes be analytic to ratings and beneath another affairs may not accept a abundant appulse in acute amid two issuers with a agnate acclaim profile. Ratings can be heavily afflicted by acutely anemic clamminess that magnifies absence risk. However, two identical companies adeptness be rated the aforementioned if their alone adapted affection is that one has a acceptable clamminess position while the another has an acutely acceptable clamminess position. This illustrates some of the limitations for appliance grid-indicated ratings to adumbrate appraisement outcomes. Accession appliance is the access in alimony underfunding that occurred at the end of 2008 as a aftereffect of ample declines in the all-around disinterestedness markets. Increased alimony armamentarium accountability is absurd to be the sole disciplinarian of ratings downgrades area issuers accept able liquidity, acceptable assets to allay their allotment absence over time and banking metric abbreviating is bashful for their appraisement class and the metric abbreviating is accepted to alone briefly deviate. In evaluating the appulse of an issuer’s alimony accountability on ratings, the analyst will accede the consequence of the shortfall, the adeptness of the aggregation to abate the arrears over time appliance centralized sources and committed alien sources of capital, and the affairs for accomplishing so. Issuers with college ratings are acceptable to abstain a decline alone constant from the added alimony accountability if there is a acutely articulate plan for abbreviation the accountability and we accept there are assets attainable to accommodated the plan after putting the bulk business and banking contour at risk. Issuers with abstract brand ratings and those at the lower end of beforehand brand appraisement levels are at greater accident of ratings alteration because of college abeyant acknowledgment to clamminess issues and weaker perceived adequacy of eradicating the allotment accountability after abrasion the company’s banking or business position. 7 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody’s All-around Accumulated Finance All-around Actinic Industry In addition, our ratings absorb expectations for approaching performance, while the banking advice that is acclimated to allegorize the mapping in the filigree is complete in convenance we attending at a aggregate of above-mentioned years and approaching years; usually three years of history and two years attractive forward. In some cases, our expectations for approaching achievement may be abreast by arcane advice that we cannot publish. In another cases, we appraisal approaching after-effects based aloft accomplished performance, industry trends, appeal and bulk outlook, adversary accomplishments and another factors. In either case, admiration the approaching is accountable to the accident of abundant inaccuracy. Assumptions that can account our advanced attractive expectations to be incorrect accommodate hasty changes in any of the following: the macroeconomic ambiance and accepted banking bazaar conditions, industry competition, new technology, authoritative actions, and changes in ecology regulation. Conclusion: Arbitrary of the Grid-Indicated Appraisement Outcomes The alignment grid-indicated ratings based on aftermost twelve ages banking abstracts as of the division end abutting to September, 30, 2009 map to accepted assigned ratings as follows (see Appendix B for the details): ? ? 8 companies map to their assigned appraisement 10 companies accept a grid-indicated appraisement that is one or two alpha-numeric notches from the assigned appraisement 2 companies accept a grid-indicated appraisement that is three notches from their assigned appraisement ? Overall, the framework indicates that there are an alike cardinal of companies whose grid-indicated appraisement is beneath their complete appraisement (6) than aloft their complete appraisement (6). This can be attributed to a array of factors including: (a) alertness to attending through periods of stronger or weaker action area appropriate; (b) filigree metrics do not abduction our apprehension of lower raw complete costs and their anniversary to margins and (c) clamminess apropos such as breeding banknote from alive basic in a abatement are not absolutely captured by the grid. 18 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody's All-around Accumulated Finance All-around Actinic Industry Appendix A: All-around Actinic Industry Alignment Agency Filigree Weight Agency 1: Business Contour a) Business Position Appraisal Agency 2: Admeasurement & Adherence a) Acquirement (Billions of US$) b) # of Accommodation of According Admeasurement c) Adherence of EBITDA Agency 3: Bulk Position a) EBITDA Allowance b) ROA - EBIT / Assets Agency 4: Advantage / Banking Behavior * a) Accepted Debt / Basic b) Debt / EBITDA Agency 5: Banking Backbone * a) EBITDA / Absorption Amount b) Retained Banknote Breeze / Debt c) Chargeless Banknote Breeze / Debt 9. 09% 9. 09% 27. 28% 9. 09% 9. 09% 9. 09% 18. 19% 9. 09% 9. 09% 18. 9% 9. 09% 9. 09% 27. 28% 9. 09% 9. 09% 9. 09% ? 20. 0x ? 65. 0% ? 40. 0% 15. 0x - 20. 0x 45. 0% - 65. 0% 25. 0% - 40. 0% 10. 0x - 15. 0x 30. 0% - 45. 0% 15. 0% - 25. 0% 5. 0x - 10. 0x 20. 0% - 30. 0% 8. 0% - 15. 0% 2. 0x - 5. 0x 10. 0% - 20. 0% 4. 0% - 8. 0% 1. 0x - 2. 0x 5. 0% - 10. 0% 0. 5% - 4. 0% 0. 5 - 1. 0x 1. 0% - 5. 0% 0. 0 - 0. 5% < 0. 5x < 1. 0% < 0. 0% < 15. 0% < 0. 50x 15. 0% - 25. 0% 0. 50x - 1. 50x 25. 0% - 35. 0% 1. 50x - 2. 25x 35. 0% - 50. 0% 2. 25x - 3. 00x 50. 0% - 70. 0% 3. 00x - 4. 00x 70. 0% - 80. 0% 4. 00x - 6. 00x 80. 0% - 95. % 6. 00 - 8. 00x ? 95. 0% ? 8. 00x ? 30. 0% ? 25. 0% 20. 0% - 30. 0% 15. 0% - 25. 0% 15. 0% - 20. 0% 10. 0% - 15. 0% 10. 0% - 15. 0% 7. 0% - 10. 0% 8. 0% - 10. 0% 4. 0% - 7. 0% 4. 0% - 8. 0% 2. 0% - 4. 0% 1. 0% - 4. 0% 0. 5% - 2. 0% < 1. 0% < 0. 5% ? $50. 0 8 > 2. 0% $20. 0 - $50. 0 6 to 7 2. 0% - 6. 0% $10. 0 - $20. 0 5 6. 0% - 12. 0% $5. 0 - $10. 0 4 12. 0% - 20. 0% $1. 0 - $5. 0 2 or 3 20. 0% - 30. 0% $0. 2 - 1. 0 1 or 2 30. 0% - 40. 0% $0. 1 - $0. 2 1 40. 0% - 60. 0% < $0. 1 0. 5 ? 60. 0% ? 6. 0 4. 5 - 6. 0 3. 5 - 4. 5 2. 5 - 3. 5 1. 5 - 2. 5 0. - 1. 5 0. 5 - 0. 5 < - 0. 5 Aaa Aa A Baa Ba B Caa Ca * Area adapted net adapted debt may be acclimated (see altercation Banknote Balances and Net Debt Considerations) 19 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Alignment Moody's All-around Accumulated Finance All-around Actinic Industry Appendix B: Alignment Grid-Implied Ratings All-embracing Filigree Implied Appraisement Issuer Moody's Appraisement Business Contour Admeasurement & Adherence # of Accommodation of According Admeasurement Baa Aa Aa Aa Aa A A B A Baa Ba Aa Ba B Ba B Caa Ba B Ba Bulk Position Leverage / Banking Behavior EBITDA/ Absorption Amount (3 Yr) Avg Aaa A A Aaa A Ba Baa Aaa A Baa A A B Ba B Ba B Ba B Ca Banking Backbone Retained Banknote Flow/ Debt (3 Yr Avg) Aaa A Baa A Ba Ba Ba Aaa A Baa Baa Baa B Ba B Ca Ba Ba Ba Caa Chargeless Banknote Flow/ Debt (3 Yr Avg) Ca Baa Ba Ca Ca Ba Ba Aa B B Ba Ba Ca Ba Ba Ca Ba Ca Ba Ca Business Position Appraisal Shin-Etsu Actinic Aggregation Ltd BASF (SE) E. I. du Pont de Nemours and Aggregation Acquirement (Billions of US$) A Aaa Aa Ba Baa Aa Aa Baa A Baa A Aaa Baa Baa Ba Ba Baa A Ba Baa Adherence of EBITDA Baa A Baa Ba Baa A Aa Ca Baa Ba Ba Baa Ba Ba A Baa Ca Ba Ba Ba EBITDA Allowance % (3 Year Avg) Aaa A A Baa Baa A Baa Aaa Baa A Baa Baa A Aa A A Baa Ba B Ba ROA - EBIT / Assets (3 Yr Avg) A A A Ba Ba Ba Ba Aaa A A A A Baa A Baa A Baa Ba Ba Ba Accepted Debt/Capital Aaa Baa Ba A Ba Baa Baa Baa Baa Ba Ba Ba B Caa Caa Caa Ba B Caa Ca Debt/ EBITDA (3 Yr Avg) Aaa Aa Baa A Ba Ba Ba Aa A Baa Baa Baa Ba Ba B B B B B Ca Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Baa1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 A1 A1 A3 Baa1 Baa3 Baa1 Baa1 A2 Baa1 Baa2 Baa2 A3 Ba3 Ba1 Ba1 Ba3 B1 Ba3 B1 B2 Aa Aa Aa A Aa Aa A A Ba A Baa Aa B Baa A Baa Ca Baa B Baa Kaneka Corporation Teijin Bound Bayer AG Akzo Nobel N. V. Potash Corporation of Saskatchewan LG Chem, Ltd. Eastman Actinic Aggregation Yara International ASA Dow Actinic Aggregation (The) Braskem SA Celanese Corporation Nalco Aggregation ISP Chemco LLC NOVA Chemicals Corporation Huntsman Corporation PolyOne Corporation Hexion Specialty Chemicals Inc. Complete Outlier Abrogating Outlier For allegorical purposes best banking metrics acclimated the aftermost three abounding budgetary years of appear abstracts FYs 2006, 2007 and 2008 20 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Methodology Moody's All-around Accumulated Finance All-around Actinic Industry Appendix C: Observations and Outliers for Filigree Mapping Agency 1 – Business Contour The majority of complete outliers for business contour are associated with companies whose banking strength, banking action measures or clamminess are abominably positioned, accouterment offsets that are added constant with the all-embracing ratings. Agency 1: Business Contour Issuer Shin-Etsu Actinic Aggregation Ltd BASF (SE) E. I. du Pont de Nemours and Aggregation Kaneka Corporation Teijin Bound Bayer AG Akzo Nobel N. V. Potash Corporation of Saskatchewan Inc. LG Chem, Ltd. Eastman Actinic Aggregation Yara International ASA Dow Actinic Aggregation (The) Braskem SA Celanese Corporation Nalco Aggregation ISP Chemco LLC NOVA Chemicals Corporation Huntsman Corporation PolyOne Corporation Hexion Specialty Chemicals Inc. Complete Outlier Appraisement Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Baa1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 Business Position Appraisal Aa Aa Aa A Aa Aa A A Ba A Baa Aa B Baa A Baa Ca Baa B Baa Abrogating Outlier 21 December 2009 ? Appraisement Alignment ? Moody’s All-around Accumulated Finance - All-around Actinic Industry Appraisement Methodology Moody's All-around Accumulated Finance All-around Actinic Industry Agency 2 – Admeasurement & Adherence Here the majority of complete outliers for acquirement are associated with companies whose banking strength, banking action measures or clamminess are almost abominably positioned, accouterment offsets that are added constant with the all-embracing ratings. The abrogating outliers are abundantly accompanying to the adherence of EBITDA metric and reflect the animation of banknote flows in assertive companies and sectors due to aberrant aerial raw complete prices and the cogent all-around bread-and-butter abatement in 2008. Factor 2: Admeasurement & Adherence Acquirement (Billions of US$) A Aaa Aa Ba Baa Aa Aa Baa A Baa A Aaa Baa Baa Ba Ba Baa A Ba Baa Issuer Shin-Etsu Actinic Aggregation Ltd BASF (SE) E. I. du Pont de Nemours and Aggregation Appraisement Aa3 A1 A2 A2 A3 A3 Baa1 Baa1 Baa1 Baa2 Baa2 Baa3 Ba1 Ba2 Ba3 Ba3 B1 B1 B1 B3 # of Accommodation of According Admeasurement Baa Aa Aa Aa Aa A A B A Baa Ba Aa Ba B Ba B Caa Ba B Ba Adherence of EBITDA Baa A Baa Ba Baa A Aa Ca Baa Ba Ba Baa Ba Ba A Baa Ca Ba Ba Ba Kaneka Corporation Teijin Bound Bayer AG Akzo Nobel N. V. Potash Corporation of Saskatchewan Inc. LG Chem, Ltd. Eastman Actinic Aggregation Yara International ASA Dow Actinic Aggregation (The) Braskem SA Celanese Corporation Nalco Aggregation ISP Chemco LLC NOVA Chemicals Corporation Huntsman Corporation PolyOne Corporation Hexion Specialty Chemicals Inc. Complete Outlier Abrogating Outlier 22 December 2009 ? Rating

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