Corporate Default and Recovery Rates,1920-2014 - 图文

MARCH 4, 2015 CREDIT POLICY

SPECIAL COMMENT Annual Default Study: Corporate Default and

Recovery Rates, 1920-2014

Table of Contents: SUMMARY RATING RATIONALE 1 INTRODUCTION 2 DEFAULTS REMAINED BENIGN IN 2014 3 MOST DEFAULTS CAME FROM CAPITAL INDUSTRIES BUT ENERGY IS THE BIGGEST CONTRIBUTOR BY VOLUME 4 SPECULATIVE-GRADE DEFAULT RATE DECLINED TO 2.0% 5 RATING DRIFT TRENDED UP DURING Q1-Q3 BEFORE DIPPING IN Q4 5 2014’S RECOVERY RATES BROADLY HIGHER THAN THEIR HISTORICAL AVERAGES 6 DEFAULT RATE EXPECTED TO RISE MODESTLY IN 2015 8 RATING ACCURACY METRICS 11 MOODY’S RELATED RESEARCH 13 METHODOLOGY AND DATA SOURCES 14 GUIDE TO DATA TABLES AND CHARTS 14 Summary Rating Rationale

This report comprises Moody's 28th annual default study in which we update statistics on the

default, loss, and rating transition experience of corporate bond and loan issuers for 2014, as well as for the historical period since 1920. This study covers financial institutions, non-financial corporates, and utilities which have long-term debt ratings. Briefly, we find that:

? Fifty-three Moody’s-rated corporate issuers defaulted in 2014, down from 69 in 2013. In contrast, default volume was up in 2014 consisting of $41.4 billion in bonds and $27.5 billion in loans. In comparison, there were $37.6 billion of bonds and $17.9 billion of loans which defaulted in 2013.

Defaults were recorded in a number of industries led by the Capital Industries, which registered 20 (or 38% of) defaults. Across regions, 31 of the defaulted issuers were from North America. The remaining defaults were from Europe, Latin America, Asia, and Africa. Measured by default volume, North America had the largest volume with $52.8 billion in defaulted bonds and loans.

Moody’s global speculative-grade default rate ended 2014 at 2.0%, down from 2013’s year-end level of 3.0% and corresponding closely to our year-ago forecast of 2.3%. The default rate for all Moody’s-rated corporate issuers closed at 1.0% at the end of 2014, also lower than the 1.4% level at year-end 2013, and again close to our year-ago forecast of 1.1%. Measured on a dollar volume basis, Moody’s global speculative-grade bond default rate finished 2014 at 1.8%, up from 1.2% at the end of 2013. Among all Moody’s-rated issuers, the volume-weighted default rate edged up to 0.4% in 2014 from 0.3% in 2013. Moody’s global speculative-grade default rate forecasting model now predicts that the speculative-grade default rate will rise in 2015 and finish the year at 2.7%. The forecast, if realized, will be higher than 2014’s closing level of 2.0% but well below the long-term average of 4.5% since 1983.

? ? Analyst Contacts: NEW YORK +1.212.553.1653 ? ? Sharon Ou +1.212.553.4403 Vice President - Senior Analyst sharon.ou@moodys.com John Kennedy +1.212.553.1303 Associate Analyst john.kennedy@moodys.com Zhi Zeng Associate Analyst zhi.zeng@moodys.com +1.212.553.1754

Albert Metz +1.212.553.4867 Managing Director - Credit Policy Research albert.metz@moodys.com

THIS REPORT WAS REPUBLISHED ON 20 MARCH 2015 WITH MINOR CHANGES IN DEFAULT RATES FOR GOVERNMENT RELATED ISSUERS AND THOSE GROUPS WHICH INCLUDE SUCH ISSUERS.

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Following the recovery of the US and European economy, credit quality improved in 2014 with the number of upgrades slightly outpacing downgrades for the first time since the global financial crisis. However, it should be noted that about one fifth of 2014’s upgrades were from the US utility sector driven by Moody’s updated view on the reliability and credit supportiveness of US utility regulations. Excluding those utility upgrades, downgrades would have again outpaced upgrades in 2014, but there were still more upgrades and fewer downgrades in 2014 than in 2013.

Measured by post-default trading prices, the average recovery rate for senior unsecured bonds was 43.3% in 2014, close to 2013’s 43.8%.

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Introduction

For the fifth consecutive year, corporate credit conditions have been quite benign. Despite a weak global economic recovery and significant geopolitical risks, healthy corporate fundamentals and a fertile primary market have helped to maintain a low corporate default rate in 2014. Indeed, many lower rated issuers were able to access the debt market with issuer-friendly terms and refinance their debt with longer-term maturities. Issuance of leveraged loans and high yield bonds remained strong in 2014.

Although defaults were relatively few last year, 2014 was not without issues. While high yield spreads steadily declined in the first six months, they trended higher in the second half, accompanied by increased volatility. Spreads widened for a number of reasons. First came the worry of Fed’s QE withdrawal in July. This was followed by geopolitical concerns stemming from the escalation of the Russia-Ukraine conflict and an ongoing slowdown in China’s economy, with particularly weak data last summer. Finally, the sharp decline in oil prices cooled down investor sentiment for risky assets.

Another notable characteristic of 2014 was the divergence in economic growth across regions. On the positive side, the US economy continued to improve, albeit weakly, with its GDP increasing by 2.4% in 20141 and the unemployment rate declining from 6.8% to 5.6%.2 The economic recovery in Europe was at an even slower pace last year, dampened by country-specific structural challenges, ongoing muted global output and trade growth, and geopolitical tensions. More recently, the risk of a Greek exit from the euro has returned. Moreover, the impact of the unfolding deep recession in Russia on Europe is as yet uncertain. In Asia, China’s GDP growth slowed while Japan’s economy contracted in the second and third quarter. Though Japan’s growth was positive in the fourth quarter, markets remain concerned about the fragility of its recovery.

Lackluster global growth has translated into expectations of further weakness in demand for oil in an already oversupplied market. Oil prices fell by nearly 50 percent in the second half of the year with West Texas Intermediate ending 2014 at a five-year low of $53 per barrel. Looking ahead, many investors wonder whether the slow economic growth and political volatility signal an end of the current benign credit cycle. With this question in mind, we’ve updated Moody’s 28th Annual Default Study by documenting the default and recovery experience of corporate debt issuers for 2014 as well as for the historical period since 1920.3 We also discuss Moody's default rate forecast for 2015 and review the performance of Moody's ratings.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

1

See BEA's news release on Jan 30th 2015. 2

Per United States Department of Labor.

3

The analysis of default and rating transitions in this report is limited to Moody’s-rated financial and non-financial corporate issuers, including utility companies. Consistent with prior year studies, this report’s default and transition rate statistics only cover issuers that have Moody’s-rated bonds and/or loans and default refers to debt default. Unless otherwise specified, ratings in this report are issuer level, senior unsecured equivalent ratings which are derived from Moody’s Senior Rating Algorithm.

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Defaults remained benign in 2014

Majority of defaults took place in Q2 and Q3

A low interest rate environment and accommodative monetary policies continued to provide sufficient liquidity to the market, allowing high yield borrowers to access debt markets at favorable terms.

Worldwide, only 53 Moody’s-rated corporate issuers defaulted in 2014, down from 69 in 2013 and slightly below our one-year ago forecast of 61 defaults. Most of the 2014 defaults were recorded in the second and third quarters when 38 companies defaulted, accounting for 72% of defaults for the whole year. In 2014, a total of $68.9 billion of debt went into default, which comprised $41.4 billion of bonds and $27.5 billion of loans. In comparison, the default volume was lower at $55.5 billion in 2013, consisting of $37.6 billion of bonds and $17.9 billion of loans. The largest default in 2014 was Energy Future Holdings Corp (EFH,

formerly TXU) which filed for bankruptcy with several of its subsidiaries in April.4 With approximately $40 billion of debt at default, EFH was the second largest defaulter in history among Moody’s-rated non-financial corporations.5

From a geographic standpoint, 31 (or 58% of) defaulted issuers were from North America in 2014. Europe accounted for another 11 defaults and the remainder came from Latin America (five), Asia Pacific (five), and Africa (one). Compared to 2013, default counts decreased in North America , Europe and Latin America but increased in Asia Pacific and Africa. The most notable change was in Europe, where defaults fell more than 50% from 24 in 2013 to 11 in 2014. In terms of volume, defaulted debt totaled $68.9 billion in 2014, up from $55.5 billion a year prior. Of that, $52.8 billion was from North America, though as noted above $40 billion is attributable to just one corporate family (EFH); default volume was $7.9 billion in Europe. Outside of the corporate debt market (and hence outside the scope of this report), 2014 also recorded a sovereign default by the Argentine government as it failed to honor the coupon payments on Argentine foreign legislation bonds which were restructured in 2005 and 2010.

In terms of default types, last year’s defaults were generally evenly distributed among distressed exchanges (36%), bankruptcies (34%), and payment defaults (30%). Exhibit 1 presents the annual default counts and defaulted debt volumes for the period 1970-2014.

EXHIBIT 1 Defaults remained benign in 2014 Default Volume ($ Bil)350.0 300.0 250.0 200.0 150.0 100.0 50.0 -Default Count197019711972197319741975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014Source: Moody’s Investors Service 45

Oncor Electric Delivery Company LLC, which is 80% owned by EFH, was not part of the filing.

The largest defaulter remains General Motors, which had roughly $50 billion of debt when it filed for bankruptcy in June 2009.

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Most defaults came from Capital industries but Energy is the biggest contributor by volume

Of the 53 defaults last year, 38% were by issuers in the Capital Industries sector.6 This was followed by issuers in the Technology sector, which contributed 17% of defaults in 2014. When measured by default volume, however, the Energy & Environment sector topped the list by accounting for more than half of the total defaulted volume. The next highest share of default volume came from the Capital Industries sector, which contributed 20% of defaulted debt. Exhibit 2 shows the distribution of 2014 defaults by broad industries.

EXHIBIT 2 2014 Default counts and volumes by broad industry Panel A Distribution of defaulted issuer counts Media & Publishing4%Energy & EnvironmentPanel B Distribution of default dollar volume Banking6êpital Industries20%Consumer Industries2%Non-Bank Finance4%Consumer Industries6%Retail & Distribution7%Technology17%Transporta-tion2onking11%Transporta-tion0%Technology9%Retail & Distribution3êpital Industries38%Non-Bank Finance1%Media & Publishing1%Energy & Environment58%Source: Moody’s Investors Service Although the Capital Industries sector accounted for 38% of defaults last year, it was not the sector with the highest rate of default. That distinction belongs to the Technology industry, which had a 2.0% default rate in 2014 (see Exhibit 3).

EXHIBIT 3

Default rate highest in the Technology Sector

Broad Industry

Default Rates*

Banking Capital Industries Consumer Industries Energy & Environment Non-Bank Finance Media & Publishing Retail & Distribution Government Related Issuers Technology Transportation Utilities

*Issuer-Weighted

0.8% 1.7% 0.5% 1.3% 0.4% 1.1% 1.8% 0.0% 2.0% 0.7% 0.0%

6

The Capital Industries sector includes automotive, capital equipment, chemicals, plastics, & rubber, construction & building, containers, packaging, & glass, forest products & paper, metals & mining, and business service industries.

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Speculative-grade default rate declined to 2.0%

As there were fewer defaults in 2014 than in 2013, the trailing twelve-month issuer-weighted default rate for all Moody’s-rated issuers closed at 1.0% in 2014, down from 1.4% in 2013. Among speculative-grade issuers, the default rate also fell to 2.0% from 3.0% (see Exhibit 4). The recent default rate has remained low relative to the historical average of 4.5% since 1983. Measured on a dollar volume basis, Moody’s speculative-grade corporate bond default rate rose to 1.8% in 2014 from 1.2% in 2013. The increase in the dollar-weighted bond default rate mainly stemmed from a few sizable defaults including Energy Future and Momentive Performance Materials.7 For all of Moody’s-rated issuers, the volume-weighted default rate edged higher to 0.4% in 2014 from 0.3% in 2013.

EXHIBIT 4 18%8%6%4%2%020192519301935194019451950195519601965197019751980198519901995200020052010Global speculative-grade default rate declined in 2014 Source: Moody’s Investors Service Rating drift trended up during Q1-Q3 before dipping in Q4

Credit quality among Moody’s-rated issuers improved in 2014 with the number of rating upgrades slightly outpacing downgrades for the first time since the global financial crisis. However, it should be noted that approximately one fifth of 2014’s rating upgrades were from the US Utility sector in January, which resulted from Moody’s updating its view on the reliability and credit supportiveness of US utility regulations.8 Excluding those utility upgrades, rating downgrades would have again outpaced upgrades in 2014, but it would still be true that there were more upgrades and fewer downgrades in 2014 than in 2013.

Among the four quarters in 2014, credit quality, as measured by rating changes, showed an upward trend in the first three quarters9 as indicated by the issuer-weighted quarterly rating drift (the percentage of

upgrades minus that of downgrades).10 In the fourth quarter however, rating drift turned negative reflecting geopolitical and economic concerns (see Exhibit 5).

7

Momentive Performance Materials had over $3 billion of debt when it filed for bankruptcy in April. 8

See Moody’s Special Comment US utility sector upgrades driven by stable and transparent regulatory frameworks, Feb 2014. 9

Not counting those US Utility upgrades in January. First quarter’s rating drift was 1.6% if we include those Utility upgrades. 10

Issuer-weighted measures which reflect the direction rather than magnitude of rating changes.

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EXHIBIT 5 Rating drift dipped in Q4 Include utility upgrades4%2%0%-2%-4%-6%-8%-10%-12%-14%-16%Exclude utility upgradesJan-90Jan-98Jan-94Jan-96Jan-88Jan-99Jan-93Jan-00Jan-08Jan-04Jan-86Jan-06Jan-89Jan-95Jan-92Jan-09Jan-03Jan-85Jan-05Jan-02Jan-97Jan-87Jan-07Jan-10Jan-11Quarter_EndJan-01Jan-14Jan-91Jan-13Jan-12Source: Moody’s Investors Service Across regions and sectors, we find that the credit quality of European financial institutions began to

deteriorate in the second half of 2014 after some stabilization in the first half. Nevertheless, the rating drift in the European financial sector in 2014, though still negative, was much improved over the double dips in 2011 and 2012. This can be seen in Exhibit 6, which shows the recent quarterly rating drifts by region and sector. Banks contributed the large majority of the downgrades among European financial institutions in 2014. In addition to deteriorated credit profiles, some of the European bank ratings were lowered following the downgrades of their corresponding sovereign ratings or Moody’s reassessment of the likelihood of systemic support.

EXHIBIT 6 European financial institutions weakened in the second half European Non-FinanceNorth America Non-Finance10%5%0%-5%-10%-15%-20%-25%-30%-35%-40%-45%European FinanceNorth America FinanceJun-08Jun-09Jun-10Jun-11Dec-10Jun-14Jun-13Mar-10Sep-08Sep-09Mar-14Mar-13Dec-08Dec-09Mar-08Mar-09Quarter_EndDec-14Jun-12Mar-12Dec-13Dec-12Sep-11Sep-10Dec-11Sep-14Mar-11Sep-13Sep-12Source: Moody’s Investors Service 2014’s recovery rates broadly higher than their historical averages

In Exhibit 7, we present the average recovery rates for debt defaulted in the past two years and put them in context with the historical averages. Last year’s recovery rates were for the most part correlated with the priority of claim in the capital structure, with a higher priority of claim enjoying a higher average rate of recovery. The only exception was that senior subordinated bonds recovered at a slightly higher rate of 46.9% relative to the senior unsecured bonds’ 43.3%, though that senior subordinated average is based on

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only four defaults (see Exhibit 19 for more details).11 Exhibit 7 further shows that 2014’s recoveries were mostly in line with their 2013 levels and higher compared to their long-term averages. For example, the average recovery rate for first lien loans was 78.4% in 2014 versus 66.6% for the period of 1982-2014, while the senior unsecured bond recovery rates averaged 43.3% last year, compared to the historical average of 37.4%.

EXHIBIT 7

Average corporate debt recovery rates measured by post-default trading prices

Lien Position

Issuer-weighted 2014

2013

1982-2014

Volume-weighted 2014

2013

1982-2014

1st Lien Bank Loan 2nd Lien Bank Loan* Sr. Unsecured Bank Loan Sr. Secured Bond Sr. Unsecured Bond Sr. Subordinated Bond* Subordinated Bond** Jr. Subordinated Bond

78.4% 10.5% n.a. 59.5% 43.3% 46.9% 38.8% n.a.

75.1% 78.7% n.a. 59.8% 43.8% 20.7% 26.4% n.a.

66.6% 31.8% 47.1% 52.8% 37.4% 31.1% 31.4% 24.7%

80.6% 10.5% n.a. 76.5% 34.3% 28.3% 38.0% n.a.

67.7% 69.2% n.a. 59.5% 29.2% 26.6% 33.7% n.a.

62.5% 28.5% 40.2% 52.4% 33.6% 26.0% 26.3% 17.1%

* The average recovery rates for 2014's and 2013's second lien bank loans and senior subordinated bonds were each based on fewer than five defaults. ** The average recovery rates for 2014's subordinated bonds were based on fewer than five defaults.

The above recovery data are based on trading prices at or post default.12 An alternative recovery measure is based on ultimate recoveries, or the value creditors realize at the resolution of a default event. For example, for issuers filing for bankruptcy, the ultimate recovery is the present value of the cash and/or securities that the creditors actually receive when the issuer exits bankruptcy, typically 1-2 years following the initial default date.13

In Exhibit 8, we present data on ultimate recovery rates for North American non-financial companies

included in Moody’s Ultimate Recovery Database (“URD”).14 The average “firm-wide” recovery rate15 for the five default resolutions was 65.4% in 2014 compared to 66.2% for the 20 companies which emerged from default in 2013. During both 2014 and 2013, the family recovery rate exceeded the historical average rate of 54.9%. The higher family recovery can be mostly attributed to the fact that out of the five default resolutions, four were pre-arranged bankruptcies, which have historically been characterized by higher

family recovery rates than regular bankruptcies. In 2013, we observed a similar pattern, which featured 55% (or eleven) pre-packs of the entire sample of companies that emerged in that year. However, considering the small sample size of default resolutions in 2014, we cannot draw any statistical conclusions about an unusual nature of family recovery rates during this period.

11

Average recovery rates of senior unsecured bonds and other debts can be based on different defaulters because some defaulters may have senior unsecured bonds and no other debts.

Among those 2014 defaulters which have recovery estimates on both senior unsecured and senior subordinated bonds, the recovery estimates for the senior unsecured bonds are consistently higher than the senior subordinated bonds of the same issuers. Please see Exhibit 19 for more details.

12

For distressed exchanges, we take trading prices at default. For other types of defaults, we take trading prices approximately one month after default. For details, see Moody’s Special Comment Moody’s Ultimate Recovery Database, April 2007. 14

The analysis on ultimate recovery is provided by David Keisman and Julia Chursin. The data are from Moody’s Ultimate Recovery Database which includes robust detailed recovery

13

information for over 5,100 loans and bonds from more than 1,000 North American corporate defaulters since 1987.

15

For a given issuer, the firm-wide recovery rate is the weighted-average recovery rate across all of the issuer’s debts where the weights are the size of the debts.

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EXHIBIT 8

Average corporate debt recovery rates measured by ultimate recoveries, 1987-2014

Lien Position

2014

Emergence Year

2013

1987-2014

2014

Default Year

2013

1987-2014

Loans*

Senior Secured Bonds** Senior Unsecured Bonds*** Subordinated Bonds

81.0% 57.1% 44.6% 0.0%

76.7% 84.2% 61.3% 21.0%

80.2% 63.0% 48.8% 28.2%

68.4% 59.4% 0.0% 0.0%

76.6% 56.9% 34.4% 21.0%

80.2% 63.0% 48.8% 28.2%

* 2014 Loans' recovery rate is based on seven observations (by year of default) and 14 observations (by year of emergence).

** Unusually high recoveries of 2013’s Sr. Secured Bonds stem from a small sample of 17 observations, which were a part of only seven defaults (by year of emergence), with debt instruments from the American Airlines bankruptcy skewing the average recovery rate toward the higher side. *** Average recovery rate of Sr. Unsecured Bonds which emerged in 2013 is impacted by a high proportion of American Airlines Sr. Unsecured Bonds (53% of the entire sample) , that recovered fully upon emergence from bankruptcy.

Moody’s credit ratings are opinions of relative expected credit losses, which are a function of both the

probability of default and severity of default (“LGD”). Exhibit 9 shows annual average credit loss rates from 1982 through 2014 for Moody’s-rated corporate issuers. The chart indicates that the average credit loss rate among all Moody’s-rated issuers declined to 0.6% in 2014 from 0.8% in 2013. To put this in historical perspective, the average annual credit loss rate for Moody’s-rated issuers since 1982 is 1.0%.

EXHIBIT 9 Credit loss rates lower in 2014 Inv-Grade9%8%7%6%5%4%3%2%1%0%Spec-GradeAll-Rated198719971991200020082004200620092003200520021990200720102011198819841986200120141998199419961999198919832013199319951992198519822012Source: Moody’s Investors Service Default rate expected to rise modestly in 2015

At the beginning of 2014 Moody’s default rate forecasting model (“Credit Transition Model” or “CTM”) predicted that the global speculative-grade default rate would finish at 2.3% by the end of the year. The model’s prediction turned out to be fairly close to the realized rate of 2.0%.16

Looking forward, CTM forecasts that the global speculative-grade default rate will rise modestly in 2015, ranging from 2.0% - 2.7% over the next 11 months (see the light blue line in Exhibit 10). The global rate is expected to finish 2015 at 2.7%, which if realized, will be higher than 2014’s closing level of 2.0% but well below the 4.5% historical average. The upward pressure primarily stems from widening spreads,

16

See Moody’s December Default Report, Jan 2014.

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geopolitical concerns, lackluster economic growth outside of the US, and potential interest rate actions by the Fed. On the other hand, an improving US economy, together with healthy corporate earnings and manageable maturity profiles, should keep the default rate low by historical standards. In addition, monetary policy continues to be accommodative globally and market access for speculative-grade companies is expected to remain in place as investors continue to search for yield.

The above-mentioned 2.7% default rate projection, which implies approximately 76 defaults globally, is made under our baseline scenario. It assumes that the US unemployment rate will ease slightly from its current level of 5.6% to 5.2% by the fourth quarter of 2015 while the high yield spread will widen to 575 bps from 460 bps.17

EXHIBIT 10 Speculative-grade default rate expected to tick up in 2015 Actual16%8%6%4%2%0oseline_ForecastPessimistic_ForecastTrailing 12-month EndingSource: Moody’s Investors Service While the recent drop in energy prices has raised concerns of rising default risk in the overall high yield market, we believe this should not lead to a spike in the near term default risk for Moody’s speculative-grade universe.18 Whereas Moody’s Liquidity Stress Index indicates a sharp rise in the Energy sector to 9.6% as of mid-February from 4.5% in December, the non-energy LSI remained unchanged at 2.9% from January, which was a 19-month low.19 Similarly, recent rating distribution and watchlist/outlook assignments show some heat among Oil & Gas companies, but there are no particular warning signs pointing to increased stress in the overall high yield market (see Exhibit 11). Although declining oil prices are deleterious for E&P and related companies, they represent a positive for consumer, transportation and a few materials-related industries. Overall, we believe lower oil prices will give the US and Indian economies a boost in the next two years, though they are unlikely to lift global growth significantly as headwinds from the euro area, China, Brazil, and Japan hold back economic activity.20

17

These are option-adjusted, three-month moving averages. 18

More discussion on the credit impact of lower oil prices on the energy and other sectors can be found at https://www.moodys.com/Pages/Credit-Impact-of-Lower-Oil-Prices.aspx 19

See Moody’s SGL Monitor - Liquidity Pressure Confined to Energy, February 2015. 20

See Moody’s Global Macro Outlook 2015-16 - Lower oil price fails to spur global growth, February 2015.

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EXHIBIT 11

Recent rating distribution and watchlist/outlook assignments in the speculative-grade universe

Sector

As of

Share of Caa-C isusers within the

SG universe

Share of Caa-C issuers on watch for downgrade or with negative

outlook

Oil & Gas

All Sectors

Beginning of 2014 Beginning of 2015 Mid-Feb 2015 Beginning of 2014 Beginning of 2015 Mid-Feb 2015

24.7% 27.3% 29.4% 27.1% 29.3% 29.6%

17.0% 18.5% 28.6% 24.9% 24.3% 25.4%

Although our baseline scenario remains relatively benign, we acknowledge that there is risk associated with the economic conditions, in particular outside of the US. In Europe, for example, downside risks include policy uncertainty and reform fatigue which could lead investors to reassess the degree of risk in the region and result in a tightening in financing conditions; uncertainties from geopolitical developments in Ukraine, Russia, and the Middle East; negative effects on the Russian economy from declining oil prices; and a

slowdown in the Chinese economy that would result in weaker demand for European exports. We cannot rule out the risk that the region falls back into recession. In our pessimistic scenario, the global economy will contract with the unemployment rate climbing to 9.7% and the high yield bond spread widening to 940 bps. In that case, the global high yield default rate is expected to rise to 9.9%, which will more than double the long-term average of 4.5% but still be well below the 2008-2009 peak of 13.9% (see the dark blue line in Exhibit 11).

Across industries, default rates for all of Moody’s-rated issuers are expected to be highest in the

Environmental sector in the US and in the Aerospace & Defense sector in Europe by the end of this year. Exhibit 12 shows the baseline one-year default rate forecasts across industries in both the US and Europe, sorted by the US rates in descending order.21 In each region, the same economic assumptions are applied to all industries, so the only factors driving the different forecasted default rates are the underlying rating histories and current ratings of the issuers in those industries.

EXHIBIT 12

One-year corporate default rate forecasts by industry

Industry

US

Europe

Industry

US

Europe

Environmental Industries* Services: Consumer Hotel, Gaming, & Leisure Metals & Mining Services: Business Consumer goods: Durable* Retail Wholesale* Aerospace & Defense Containers, Packaging, & Glass Media: Advertising, Printing & Publishing

21

5.9% 4.3% 3.8% 3.6% 3.0% 2.8% 2.8% 2.8% 2.7% 2.5% 2.4%

1.8% 2.0% 1.5% 1.6%

2.0%

3.8% 2.2% 1.2%

Transportation: Cargo Capital Equipment

Healthcare & Pharmaceuticals High Tech Industries Utilities: Oil & Gas Construction & Building Chemicals, Plastics, & Rubber Energy: Electricity* Transportation: Consumer Media: Diversified & Production* FIRE: Insurance

1.3% 1.2% 1.2% 1.2% 1.0% 1.0% 0.9% 0.8% 0.6% 0.5% 0.5%

0.8% 0.8% 1.2% 0.7% 0.5% 1.2% 0.7%

0.9%

2.1%

The industry default rate forecasts include both investment-grade and speculative-grade issuers.

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EXHIBIT 12

One-year corporate default rate forecasts by industry

Industry

US

Europe

Industry

US

Europe

Consumer goods: Non-durable* Energy: Oil & Gas Beverage, Food, & Tobacco FIRE: Finance

Media: Broadcasting & Subscription Telecommunications Automotive

2.4% 2.0% 1.7% 1.5% 1.4% 1.3% 1.3%

0.8% 1.4% 0.6% 0.8% 1.0% 0.6%

Forest Products & Paper* FIRE: Real Estate Banking

Sovereign & Public Finance Utilities: Electric Utilities: Water*

0.4% 0.4% 0.4% 0.1% 0.0%

1.2% 0.9% 0.1% 0.2% 0.2%

* Default rate forecasts are not reported in these sectors in either Europe or the US due to small sample size (fewer than ten issuers).

Rating accuracy metrics

Moody’s ratings have historically proven to be effective predictors of default. This can be seen in Exhibit 13, which plots the median ratings of over 1,900 corporate issuers which defaulted from 1983 to 2014. The chart demonstrates that, historically, Moody’s-rated issuers have been downgraded to the B1 level as early as five years prior to default. The comparable rating was lower at B3 among issuers which defaulted in 2014. The median rating one year prior to default for all defaulters in 2014 was Caa2, two notches lower than that rating measured over the entire period 1983-2014.

EXHIBIT 13 Median ratings prior to default, 2014 vs. long-term average 2014Ba3B1B2B3Caa1Caa2Caa3CaC605550454035302520151050Months prior to default1983-2014Source: Moody’s Investors Service The data in Exhibit 13 above demonstrate that Moody’s corporate ratings are correlated with subsequent default experience. To further demonstrate the ability of ratings to separate issuers with low credit risk from those with high credit risk, we use the Average Position of defaults (“AP”) to evaluate the accuracy of Moody’s ordinal rating systems (see Exhibit 14).22 AP measures the average position for defaulters with position defined as the percentage of issuers with higher or equal ratings. A greater AP indicates a more discriminatory rating system as there are more issuers rated higher than the defaulters, or equivalently that defaulters are generally found in lower rating categories. Exhibit 14 reveals that between 1983 and 2014, the Average Position of defaulters has been consistently high during the entire period, with an average of

22

For a detailed discussion of average default position and the mathematical derivation of the accuracy ratio from the average default position, please refer to Moody’s Special Comment, Measuring Ratings Accuracy Using Average Default Position, Feb 2011.

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92.0% for the one-year horizon and 86.6% for the five-year horizon. Such high APs indicate that Moody’s ratings have been effective in predicting defaults over both the short- and long-term periods. The lowest one-year AP was observed in 2008 when Lehman Brothers and several other high grade financial institutions failed. Since then, the AP has quickly recovered and reached 92.5% in 2014.

Across broad sectors, the average APs are higher among non-financial corporate issuers than for financial institutions, particularly in Europe over the five year horizon. The lower AP in the European financial sector mainly results from a few defaults among high rated financial institutions, most of which were in the form of distressed exchanges on junior obligations only. This reflects the structural changes in the European banking sector. Specifically, the systemic support which was widely expected in the financial sector before the global financial crisis had its limits with the junior debt holders uncovered in some cases.23 As a growing number of countries have moved toward adopting bank resolution regimes that include provisions for burden-sharing with creditors (or “bail-in”) to resolve failing banks, Moody’s has updated its banking methodologies to appropriately assess government support assumption in bank ratings.24

EXHIBIT 14 One- and five-year accuracy default position by cohort year, 1983-2014 1-Year100????upe`UP%5-YearCohort YearSource: Moody’s Investors Service

23

See more details in Moody’s Special Comment, European Corporate Default and Recovery Rates, 1985 – 1H 2014, December 2014.

See Moody’s Special Comments - Supported Bank Debt Ratings at Risk of Downgrade Due to New Approaches to Bank Resolution (February 2011), European Banks: How Moody’s Analytic Approach Reflects Evolving Challenges (January 2012), FAQs: Moody’s Finalizes Approach for Rating Certain Bank Contingent Capital Securities and Changes Baseline Assumptions for Rating Bank Subordinated Debt (May 2013), Reassessing Systemic Support for EU Banks (May 2014) and Bank Systemic Support Global Update: Resolution Regimes Drive Shifts in Support (July 2014). For Moody’s latest banking rating methodology and request for comment for proposed changes in its bank rating methodology, please see Global Banks (July 2014) and Proposed Bank Rating Methodology (September 2014).

24

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Moody’s Related Research

Special Comments: ? ? ? ? ? ? ? ? ? ? ? ? ? ?

2015 Outlook – North American Non-Financial Corporates, December 2014 (177645) 2015 Outlook - EMEA Non-Financial Corporates, December 2014 (177584) 2015 Outlook - Global Banks, December 2014 (178070)

Annual Default Study: Corporate Default and Recovery Rates, 1920-2013, March 2014 (165331) European Corporate Default and Recovery Rates, 1985–2014H1, December 2014 (177782) Glossary of Moody’s Ratings Performance Metrics, September 2011 (135451)

Industry Credit Risk: Recent Trends for Global Non-Financial Corporations, October 2013 (159346) Lower Oil Prices in 2015 Reduce E&P Spending and Raise Risk for OFS Sector, January 2015 (1001977) Measuring Ratings Accuracy Using Average Default Position, February 2011 (129451)

Moody’s Global Macro Outlook 2015-16 - Lower oil price fails to spur global growth, February 2015 (1002683)

Moody’s SGL Monitor - Liquidity Pressure Confined to Energy, February 2015 (179258).

Refunding Risk and Needs 2015-19: US Speculative-Grade Corporations Record Maturities Due in 2019; New Issuance Wave Likely in 2017, February 2015 (179022)

Refunding Risk and Needs: EMEA Speculative-grade Non-Financial Companies: Record Liquidity Levels Push Maturity Wall Out to 2018, July 2014 (173568)

US Corporate Default Monitor - Fourth Quarter 2014 - Defaults Projected to Tick Up in 2015, Following Slow End to 2014, January 2015 (1002527)

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.

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Methodology and Data Sources

Moody’s Definition of Default

Moody’s definition of default is applicable only to debt or debt-like obligations (e.g., swap agreements). For details, please refer to Moody’s Rating Symbols and Definitions.

Methodology

The methodology used in this study can be found in the Glossary of Moody’s Ratings Performance Metrics. The Glossary report is a technical paper that explains how Moody’s calculates default rates, transition rates, and rating performance metrics in detail.

Changes in this Year’s Report

Moody’s occasionally discovers historical defaults, leading to minor revisions of the historical data. In 2014, Moody’s reclassified the industry codes for certain sovereign- and sub-sovereign-related issuers leading to small changes to the universe of the study. As always, the data contained in the most recently published Moody’s default study supersedes the data published in previous reports.

Data Sources

Moody’s bases the results of this study on its proprietary database of ratings and defaults for corporate bond and loan issuers. Municipal and sub-sovereign debt issuers, structured finance securities, private placements, and issuers with only short-term debt ratings are excluded unless otherwise noted. In total, Moody’s data covers the credit experiences of over 20,000 corporate issuers that sold long-term public debt at some time between 1920 and 2014. As of January 1, 2015, over 5,000 corporate issuers held a Moody’s long-term bond, loan, or corporate family rating. Moody’s database of corporate defaults covers more than 3,000 long-term bond and loan defaults by

issuers both rated and non-rated by Moody’s. Additional data sources, such as Barclay’s Fixed Income Index data, supplemented Moody’s proprietary data in the construction of the aggregate dollar volume-weighted default rates. Defaulted bond pricing data was derived from Bloomberg, Reuters, IDC, and TRACE. The majority of these market quotes represent an actual bid on the debt instrument, although no trade may have occurred at that price. Over the 1982-2014 period, the dataset includes post-default prices for

approximately 5,000 defaulted instruments issued by over 1,700 defaulting corporations. Moody’s makes the 1970-2014 credit rating, default, and recovery rate data used in this study available through its Default and Recovery Database (DRD).

Guide to Data Tables and Charts

In this section, we briefly describe the interpretation of some of the Exhibits contained in this report. Exhibit 13 was derived by mapping Moody’s ratings to a linear scale, then taking the median values of the numerically mapped ratings.

Exhibit 21 shows average senior unsecured recovery rates by letter rating and year prior to default. Each cell in the table indicates the average recovery rate on senior unsecured bonds with a specific rating within T years of default. For example, the 37.2% two-year B recovery rate reported in Exhibit 21 indicates the average recovery rate on B rated issues that default at some time within a two-year period, not recovery rate for issuers rated B exactly two years before default. Together with issuer-weighted average cumulative

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default rates, these multi-period recovery estimates are used to calculate cumulative expected credit loss rates, as presented in Exhibit 22.

Exhibits 32 through 37 show issuer-weighted historical average default rates by rating category over various investment horizons. These data were generated by averaging the multi-year default rates of cohorts formed at monthly intervals. In addition to their being statements of historical fact, these data are also useful proxies for expected default rates. For example, over a five-year period a portfolio of B-rated issuers defaulted at a 23.3% average rate between 1983 and 2014 (see Exhibit 34). For an investor with a five-year exposure to a B-rated debt obligation or counterparty, this estimate also happens to be the best estimate of the expected risk of default for a B-rated exposure based on the available historical data, particularly over long investment horizons.

Exhibit 40 shows average cumulative volume-weighted default rates by rating category. Whereas issuer-based default rates weight each issuer equally, these data weight each issuer by the total volume of

defaulted debt; larger defaults receive relatively more weight. Average default rates based on debt volume affected are less suitable estimates of expected default risk. One reason is that issuer default volumes vary considerably over time. On average, a leveraged corporate issuer defaults on approximately $300 million of bonds. However, that total has been as high as $30 billion (WorldCom). Issuer-based default rates receive particular emphasis in the rating process because the expected likelihood of default of a debt issuer holding a given rating is expected be the same regardless of differences in the nominal sizes of the exposures. Exhibit 41 shows the cumulative issuer-weighted historical default rates of cohorts formed between the years 1970 and 2014 (January 1 of each year). These data are a subset of the data used to calculate the issuer-weighted averages shown in Exhibits 32 through 34 (which, again, are based on cohorts formed at monthly time intervals). The default rates in Exhibit 41 may be useful for scenario analysis. For example, if one believed that future default rates for a given pool of issuers will behave as they did in, say, 1997, then one can use the January 1, 1997 cohort cumulative default rates as proxies for expected default rates.

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EXHIBIT 15

Moody’s-Rated 2014 Corporate Bond and Loan Defaults*

Company

Country

Initial Default Type

Bonds (US$ mil)

Loans (US$ mil)

In Jan 2014 cohort?**

Affinion Group Holdings, Inc. African Bank Limited

Alion Science and Technology Corp Allen Systems Group, Inc. Alliance Bank Altegrity, Inc. American Media, Inc. Banco Espirito Santo, S.A.*** Bumi Resources Tbk (P.T.)

Cash Store Financial Services Inc. (The) China Forestry Holdings Co Ltd Codere S.A.

Corporacion GEO, S.A.B. DE C.V. Desarrolladora Homex, S.A.B. de C.V. Endeavour International Corporation Energy Future Competitive Holdings Co. Energy Future Holdings Corp.

Energy Future Intermediate Holding Company Espirito Santo Financial Group S.A. Espirito Santo Financiere S.A. Essar Steel Algoma Inc. Global Geophysical Services GSE Environmental, Inc. Guitar Center Inc. Harlan Laboratories, Inc. Heta Asset Resolution AG***

Hidili Industry International Development Ltd Ideal Standard International S.A. iPayment Holdings, Inc iPayment Inc.

James River Coal Company Metinvest B.V.

Midwest Vanadium Pty Ltd MModal Inc.

Momentive Performance Materials Inc. (Old) Nelson Education Ltd.

New Sbarro Intermediate Holdings, Inc. New World Resources N.V. NexTag, Inc.

United States South Africa United States United States Kazakhstan United States United States Portugal Indonesia Canada China Spain Mexico Mexico United States United States United States United States Luxembourg Luxembourg Canada United States United States United States United States Austria China Luxembourg United States United States United States Netherlands Australia United States United States Canada United States Netherlands United States

Distressed exchange Missed interest payment Distressed exchange Missed interest payment Missed interest payment Distressed exchange Distressed exchange Missed interest payment Distressed exchange Bankruptcy

Missed interest payment Missed interest payment Missed interest payment Missed interest payment Missed interest payment Chapter 11 Chapter 11 Chapter 11 Bankruptcy Bankruptcy

Missed interest payment Chapter 11

Prepackaged Chapter 11 Distressed exchange Distressed exchange Distressed exchange Distressed exchange Distressed exchange Distressed exchange Distressed exchange Chapter 11 Distressed exchange Missed interest payment Chapter 11 Chapter 11

Missed interest payment Prepackaged Chapter 11 Missed interest payment Distressed exchange

89 350 213 300 615 599 121 800 1,075 121 180 1,033

705 0 650 7,709 1,162 269 785 250

535

589 197 360 134 375 473 386 335 250 3,077

368

195 950 11 181 75 24 350 81 172 280

65 500 291 433 137 93

yes yes yes yes no yes yes yes yes yes yes no no no yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes

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EXHIBIT 15

Moody’s-Rated 2014 Corporate Bond and Loan Defaults*

Company

Country

Initial Default Type

Bonds (US$ mil)

Loans (US$ mil)

In Jan 2014 cohort?**

NII Capital Corp NII Holdings Inc.

NII International Telecom S.C.A. Northland Resources AB Phones4u Finance plc Phosphorus Holdco plc

Renhe Commercial Holdings Company Limited Sare Holding, S.A.B. de C.V. SMU S.A.

Sorenson Communications, Inc.

Texas Competitive Electric Holdings Co LLC Travelport LLC

UniTek Global Services, Inc. USEC Inc. VAB Bank

Verso Paper Holdings LLC Waterford Gaming LLC YRC Worldwide Inc.

Brazil Brazil Brazil Sweden United Kingdom United Kingdom China Mexico Chile United States United States United States United States United States Ukraine United States United States United States

Missed interest payment Missed interest payment Missed interest payment Bankruptcy

Placed under administration Placed under administration Distressed exchange Distressed exchange Missed principal and interest payments

Prepackaged Chapter 11 Chapter 11 Distressed exchange Missed interest payment Chapter 11

Missed principal and interest payments

Distressed exchange Missed principal payment Distressed exchange

2,750

0 1,600 745 698 333 660 18 735 8,234 389

530 112 401 42 51

203

72 571 22,636

191

yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes yes

* This list only includes companies that have rated bonds and/or loans within one year prior to default. ** Only issuers included in the Jan 1st cohort are included in Moody’s default rates in this report. *** These banks only defaulted on subordinated debts.

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EXHIBIT 16

Annual Moody’s-Rated Global Corporate Issuer Default Counts, 1920-2014

Year

Inv-Grade Spec-Grade All-Rated

Year

Inv-Grade

Spec-Grade

All-Rated

Year

Inv-Grade Spec-Grade All-Rated

1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951

8 7 10 5 3 7 4 1 0 3 2 6 10 9 5 9 3 4 9 2 2 0 0 0 0 0 0 0 0 0 0 0

25 25 23 22 37 34 18 15 8 12 21 78 108 189 60 51 19 18 17 13 22 10 4 3 3 2 0 2 0 5 0 1

33 32 33 27 40 41 22 16 8 15 23 84 118 198 65 60 22 22 26 15 24 10 4 3 3 2 0 2 0 5 0 1

1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 0 0 2 0 0 0 1 0 0 0 0 2 0

0 0 1 1 0 1 0 0 2 3 4 3 0 0 1 0 1 0 25 3 5 3 3 4 2 3 4 1 4 2 11 13

0 0 1 1 0 1 0 0 2 3 4 3 0 0 1 0 1 0 27 3 5 5 3 4 2 4 4 1 4 2 13 13

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

1 0 3 0 0 4 0 1 0 0 0 0 0 0 1 1 4 4 13 0 0 2 0 0 14 11 2 1 1 1 2

12 15 30 31 29 47 83 65 31 19 16 27 17 25 48 100 120 183 126 83 38 29 31 18 89 255 56 38 64 68 51

13 15 33 31 29 51 83 66 31 19 16 27 17 25 49 101 124 187 139 83 38 31 31 18 103 266 58 39 65 69 53

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EXHIBIT 17

Annual Rated Global Corporate Bond and Loan Default Volumes, 1970-2014*

Year

Investment Grade Bond

Loan

Total

Speculative Grade Bond

Loan

Total

Bond

All Ratings

Loan

Total

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

$154 $0 $0 $17 $0 $0 $0 $68 $0 $0 $0 $0 $243 $0 $183 $0 $138 $0 $0 $1,506

$0 $1,348

$0 $0 $0 $0 $0 $0 $399 $461 $4,115 $21,195 $46,350

$0 $0 $2,155

$0 $0

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,225 $3,950 $5,363 $13,122 $870 $0 $2,825

$0 $0

$154 $0 $0 $17 $0 $0 $0 $68 $0 $0 $0 $0 $243 $0 $183 $0 $138 $0 $0 $1,506

$0 $1,348

$0 $0 $0 $0 $0 $0 $399 $1,686 $8,065 $26,558 $59,472 $870 $0 $4,980

$0 $0

$756 $132 $215 $94 $69 $176 $34 $179 $112 $18 $302 $47 $515 $1,110 $399 $1,344 $3,993 $8,940 $5,435 $9,517 $20,071 $15,485 $6,601 $1,871 $2,100 $4,788 $4,053 $5,104 $9,469 $25,311 $24,723 $78,379 $104,091 $35,281 $11,810 $26,798 $7,758 $4,755

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $242 $361 $0 $1,603 $570 $698 $424 $299 $172 $1,435 $948 $3,017 $14,107 $26,206 $34,103 $37,223 $10,208 $4,197 $8,745 $2,630 $1,983

$756 $132 $215 $94 $69 $176 $34 $179 $112 $18 $302 $47 $515 $1,110 $399 $1,344 $3,993 $9,182 $5,796 $9,517 $21,674 $16,055 $7,299 $2,295 $2,399 $4,961 $5,488 $6,052 $12,486 $39,418 $50,928 $112,483 $141,314 $45,490 $16,008 $35,543 $10,388 $6,738

$910 $132 $215 $112 $69 $176 $34 $247 $112 $18 $302 $47 $758 $1,110 $582 $1,344 $4,131 $8,940 $5,435 $11,023 $20,071 $16,833 $6,601 $1,871 $2,100 $4,788 $4,053 $5,104 $9,868 $25,772 $28,838 $99,574 $150,441 $35,281 $11,810 $28,953 $7,758 $4,755

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $242 $361 $0 $1,603 $570 $698 $424 $299 $172 $1,435 $948 $3,017 $15,332 $30,156 $39,466 $11,078 $4,197 $11,570 $2,630 $1,983

$910 $132 $215 $112 $69 $176 $34 $247 $112 $18 $302 $47 $758 $1,110 $582 $1,344 $4,131 $9,182 $5,796 $11,023 $21,674 $17,403 $7,299 $2,295 $2,399 $4,961 $5,488 $6,052 $12,885 $41,104 $58,994 $139,041 $46,359 $16,008 $40,523 $10,388 $6,738

$50,345 $200,786

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EXHIBIT 17

Annual Rated Global Corporate Bond and Loan Default Volumes, 1970-2014*

Year

Investment Grade Bond

Loan

Total

Speculative Grade Bond

Loan

Total

Bond

All Ratings

Loan

Total

2008 2009 2010 2011 2012 2013 2014

* Default volume in millions of USD

EXHIBIT 18

$183,155 $38,945 $4,856 $1,156 $323 $1,893 $939

$10,380 $21,931

$0 $1,411

$0 $0 $0

$193,535 $60,876 $4,856 $2,567 $323 $1,893 $939

$55,060 $145,361 $20,553 $29,336 $31,360 $35,671 $40,466

$32,322 $123,876 $14,042 $4,671 $18,289 $17,889 $27,510

$87,382 $269,237 $34,595 $34,007 $49,650 $53,560 $67,976

$238,215 $184,306 $25,409 $30,492 $31,683 $37,564 $41,405

$42,701 $145,807 $14,042 $6,082 $18,289 $17,889 $27,510

$280,916 $330,113 $39,451 $36,574 $49,973 $55,453 $68,915

Annual Issuer Default Counts and Volume Totals by Geographical Region, 1986-2014

Year

Africa &

Middle East Asia Pacific

Issuer Counts

Europe

Latin America

Dollar Volumes (US$ mil)

North Africa &

America Middle East Asia Pacific

Europe

Latin America

North America

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3 0 0 1 0 0 0 0 1 0

0 0 0 4 1 0 0 0 0 0 0 2 5 8 2 15 2 2 0 0 0 0 3 17 2

0 0 0 0 0 1 0 0 1 0 0 0 1 9 3 16 26 7 6 1 7 3 12 34 9

0 0 0 0 0 0 0 0 0 0 1 2 0 7 2 6 15 11 0 1 2 0 2 10 2

33 31 29 47 82 65 31 19 15 27 16 21 43 77 117 147 96 63 31 29 22 15 86 204 45

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,444

$0 $0 $183 $0 $0 $0 $0 $650 $0

$0 $0 $0 $969 $200 $0 $0 $0 $0 $0 $0 $614 $1,444 $4,339 $3,968 $7,832 $1,842 $550 $0 $0 $0 $0 $625 $7,073 $6,290

$0 $0 $0 $0 $0 $999 $0 $0 $774 $0 $0 $0 $200 $4,012 $713 $10,635 $47,385 $3,296 $2,521 $207 $1,601 $771 $53,374 $28,010 $9,119

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $207 $310 $0 $1,908 $238 $1,909 $10,087 $4,152 $366 $100 $167 $0 $555 $3,031 $487

$4,131 $9,182 $5,796 $10,054 $21,474 $16,404 $7,299 $2,295 $1,625 $4,961 $5,280 $5,129 $11,241 $30,845 $54,074 $116,221 $141,472 $38,361 $12,938 $40,215 $8,620 $5,967 $226,361 $291,350 $23,554

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EXHIBIT 18

Annual Issuer Default Counts and Volume Totals by Geographical Region, 1986-2014

Year

Africa &

Middle East Asia Pacific

Issuer Counts

Europe

Latin America

Dollar Volumes (US$ mil)

North Africa &

America Middle East Asia Pacific

Europe

Latin America

North America

2011 2012 2013 2014

EXHIBIT 19

0 1 0 1

0 0 2 5

12 12 24 11

1 4 9 5

26 48 34 31

$0 $48 $0 $350

$4 $0 $546 $3,397

$10,047 $16,750 $24,096 $7,855

$358 $3,016 $9,249 $4,539

$26,166 $30,159 $21,562 $52,773

2014 Defaulted Corporates Bond and Loan Recoveries*

Company

Initial Default Type

Bank Loans 1st Lien

2nd Lien

Sr. Sec.

Bonds

Sr. Unsec.

Sr. Sub.

Sub.

African Bank Limited** Allen Systems Group, Inc. Alliance Bank Altegrity, Inc.

Bumi Resources Tbk (P.T.)

Cash Store Financial Services Inc. (The) China Forestry Holdings Co Ltd Codere S.A.

Endeavour International Corporation Energy Future Holdings Corp.*** Energy Future Intermediate Holding Company***

Espirito Santo Financial Group S.A. Espirito Santo Financiere S.A. Essar Steel Algoma Inc. Global Geophysical Services Harlan Laboratories, Inc.

payment default payment default payment default distressed exchange distressed exchange bankruptcy payment default payment default payment default bankruptcy bankruptcy bankruptcy bankruptcy payment default bankruptcy distressed exchange

100.4% 100.3% 83.5%

83.3%

50.0%

23.0% 22.3%

45.5% 106.3% 105.1%

100.0%

39.0%

54.0%

90.4%

78.5% 82.1%

47.5% 89.8%

32.0% 40.5% 3.1% 51.5%

5.0% 13.8% 84.3% 55.0%

67.0%

32.0% 78.5% 7.3% 82.5%

5.0%

82.0%

4.3%

29.5%

38.8%

Alion Science and Technology Corporation distressed exchange

Hidili Industry International Development distressed exchange Ltd

Hypo Alpe-Adria-Bank International AG Ideal Standard International S.A. iPayment Holdings, Inc. iPayment Inc.

James River Coal Company Metinvest B.V.

Midwest Vanadium Pty Ltd MModal Inc.

Momentive Performance Materials Inc.

distressed exchange distressed exchange distressed exchange distressed exchange bankruptcy distressed exchange payment default Bankruptcy Bankruptcy

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EXHIBIT 19

2014 Defaulted Corporates Bond and Loan Recoveries*

Company

Initial Default Type

Bank Loans 1st Lien

2nd Lien

Sr. Sec.

Bonds

Sr. Unsec.

Sr. Sub.

Sub.

Nelson Education Ltd.

New Sbarro Intermediate Holdings, Inc. New World Resources N.V. NexTag, Inc. NII Capital Corp.

NII International Telecom S.C.A. Northland Resources AB Phones4u Finance plc Phosphorus Holdco plc

Renhe Commercial Holdings Company Limited

Sorenson Communications, Inc. Texas Competitive Electric Holdings Company LLC USEC Inc.

Verso Paper Holdings LLC****

* Based on trading prices.

payment default Bankruptcy payment default distressed exchange payment default payment default Bankruptcy Bankruptcy Bankruptcy distressed exchange Bankruptcy Bankruptcy bankruptcy distressed exchange

83.7% 45.0%

29.9%

100.1% 79.2%

10.5%

0.2% 33.0%

91.0% 71.5%

60.6%

8.5%

23.8% 63.8%

3.0% 85.4%

9.6% 34.3%

72.0%

** African Bank was placed under curatorship. Retail deposits, which comprise less than 1% of the bank's creditors, will be met in full while wholesale deposits and senior debt will be transferred to a good bank at 90% of face value, implying a 10% ultimate loss. *** The secured bonds of EFH and EFIH are high as they have collateral from Oncor which is ring fenced from its distressed parent and affiliates. **** Verso Paper’s senior secured bond is a second lien debt.

EXHIBIT 20

Annual Defaulted Corporate Bond and Loan Recoveries*

Year

Loan 1st Lien

Sr. Sec.

Sr. Unsec.

Bond Sr. Sub.

Sub.

Jr. Sub.

All Bonds

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 72.0% 67.9% 60.6% 53.4% 67.6% 75.4%

72.5% 40.0% n.a. 83.6% 59.2% 71.0% 55.4% 46.5% 33.8% 48.4% 62.1% n.a. 69.3% 62.0%

35.8% 52.7% 49.4% 60.2% 51.1% 63.8% 45.2% 43.6% 38.2% 36.7% 49.2% 37.1% 53.7% 47.6%

48.1% 43.5% 67.9% 29.6% 46.8% 46.5% 33.4% 35.3% 25.5% 41.8% 49.4% 51.9% 29.6% 34.3%

30.0% 41.1% 44.3% 39.7% 41.4% 46.9% 33.8% 26.8% 18.9% 24.4% 38.0% 44.1% 38.0% 41.5%

n.a. n.a. n.a. 48.5% n.a. n.a. 36.5% 16.9% 10.7% 7.8% 13.5% n.a. 40.0% n.a.

35.3% 44.5% 45.5% 43.6% 47.4% 51.3% 38.8% 32.3% 25.6% 35.5% 45.9% 43.1% 45.6% 43.3%

22 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 20

Annual Defaulted Corporate Bond and Loan Recoveries*

Year

Loan 1st Lien

Sr. Sec.

Sr. Unsec.

Bond Sr. Sub.

Sub.

Jr. Sub.

All Bonds

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

* Based on trading prices.

85.5% 78.8% 56.7% 73.5% 68.8% 64.9% 58.4% 73.4% 87.7% 83.8% 83.6% 68.6% 61.7% 53.6% 70.9% 70.9% 66.4% 75.1% 78.4%

47.6% 75.5% 46.8% 36.0% 38.6% 31.7% 50.6% 69.2% 73.3% 71.9% 74.6% 80.6% 54.9% 37.5% 62.5% 63.3% 51.2% 59.8% 59.5%

62.8% 56.1% 39.5% 38.0% 24.2% 21.2% 29.5% 41.9% 52.1% 54.9% 55.0% 53.7% 33.2% 36.9% 51.5% 41.3% 43.0% 43.8% 43.3%

43.8% 44.7% 45.0% 26.9% 20.8% 19.8% 21.4% 37.8% 42.3% 32.8% 41.4% 56.2% 23.3% 22.7% 37.5% 36.7% 33.7% 20.7% 46.9%

22.6% 33.1% 18.2% 35.6% 31.9% 15.9% 23.4% 12.3% 94.0% 51.3% 56.1% n.a. 23.6% 45.3% 33.7% 35.4% 37.3% 26.4% 38.8%

n.a. 30.6% 62.0% n.a. 7.0% 47.0% n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

41.5% 48.8% 38.3% 33.8% 25.1% 21.6% 29.7% 41.4% 58.5% 56.5% 55.0% 55.1% 33.9% 33.9% 51.8% 46.3% 44.7% 46.8% 47.8%

EXHIBIT 21

Average Sr. Unsecured Bond Recovery Rates by Year Prior to Default, 1982-2014*

Year 1

Year 2

Year 3

Year 4

Year 5

Aaa** Aa A Baa Ba B Caa-C

Investment Grade Speculative Grade All Rated

* Issuer-weighted, based on post default trading prices

n.a. 37.24% 31.77% 41.66% 45.68% 38.03% 37.47% 39.33% 38.22% 38.27%

3.33% 39.02% 42.68% 43.04% 44.24% 37.20% 37.51% 42.59% 38.00% 38.32%

3.33% 38.08% 44.49% 43.52% 43.26% 37.39% 37.37% 43.51% 38.05% 38.52%

61.88% 43.95% 43.92% 43.33% 42.66% 37.79% 37.58% 43.64% 38.36% 38.90%

75.58% 42.27% 43.69% 43.35% 42.32% 38.43% 37.65% 43.71% 38.72% 39.30%

** The Aaa recovery rates are based on five observations, three of which are Icelandic banks that have an average recovery rate of 3.33%.

23 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 22

Average Cumulative Credit Loss Rates by Letter Rating, 1982 - 2014*

Year 1

Year 2

Year 3

Year 4

Year 5

Aaa Aa A Baa Ba B Caa-C Investment Grade Speculative Grade

All Rated

EXHIBIT 23

0.00% 0.02% 0.05% 0.11% 0.60% 2.29% 9.32% 0.06% 2.79% 1.12%

0.02% 0.05% 0.13% 0.30% 1.77% 5.59% 16.00% 0.17% 5.80% 2.29%

0.02% 0.09% 0.27% 0.52% 3.20% 8.91% 21.47% 0.31% 8.68% 3.37%

0.02% 0.16% 0.43% 0.79% 4.77% 11.80% 25.76% 0.47% 11.19% 4.29%

0.03% 0.25% 0.62% 1.06% 6.12% 14.35% 29.41% 0.66% 13.33% 5.05%

* Based on average default rates and senior unsecured bond recoveries measured on issuer-weighted basis.

Annual Credit Loss Rates by Letter Rating, 1982-2014*

Year

Aaa

Aa

A

Baa

Ba

B

Caa-C

Inv-Grade

Spec-Grade

All Rated

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.36% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

0.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.15% 0.14% 0.00% 0.00% 0.00% 0.00%

0.21% 0.00% 0.18% 0.00% 0.51% 0.00% 0.00% 0.35% 0.00% 0.18% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.08% 0.07% 0.32% 0.17% 0.79% 0.00% 0.00% 0.09% 0.00%

1.78% 0.43% 0.42% 0.56% 1.02% 1.01% 0.68% 1.77% 2.13% 3.14% 0.17% 0.38% 0.12% 0.40% 0.00% 0.09% 0.54% 0.88% 0.60% 1.19% 1.07% 0.62% 0.22% 0.00% 0.10%

1.43% 3.02% 3.45% 3.02% 5.66% 2.37% 3.39% 4.85% 9.89% 7.76% 4.69% 2.93% 1.91% 2.30% 0.54% 0.90% 2.43% 3.19% 4.74% 7.84% 3.29% 1.27% 0.42% 0.47% 0.55%

14.82% 19.70% 50.59% 0.00% 10.87% 7.25% 14.93% 14.11% 37.79% 28.50% 15.01% 17.32% 2.50% 4.82% 5.34% 6.60% 6.24% 11.49% 14.94% 25.18% 20.79% 13.58% 6.12% 3.05% 2.83%

0.14% 0.00% 0.05% 0.00% 0.12% 0.00% 0.00% 0.17% 0.00% 0.04% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.03% 0.03% 0.12% 0.12% 0.35% 0.00% 0.00% 0.04% 0.00%

2.28% 1.81% 1.70% 1.38% 2.77% 1.60% 1.95% 3.26% 6.35% 5.99% 2.65% 1.98% 0.99% 1.61% 0.64% 0.94% 1.99% 3.53% 5.07% 8.53% 5.90% 3.26% 1.23% 0.82% 0.84%

0.67% 0.46% 0.47% 0.38% 0.92% 0.58% 0.75% 1.35% 2.33% 1.96% 0.76% 0.56% 0.31% 0.54% 0.22% 0.34% 0.80% 1.50% 2.17% 3.43% 2.35% 1.19% 0.45% 0.33% 0.33%

24 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 23

Annual Credit Loss Rates by Letter Rating, 1982-2014*

Year

Aaa

Aa

A

Baa

Ba

B

Caa-C

Inv-Grade

Spec-Grade

All Rated

2007 2008 2009 2010 2011 2012 2013 2014 Average Max Min

EXHIBIT 24

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

0.00% 0.48% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.03% 0.48% 0.00%

0.00% 0.37% 0.14% 0.11% 0.00% 0.00% 0.00% 0.07% 0.03% 0.37% 0.00%

0.00% 0.35% 0.59% 0.00% 0.05% 0.05% 0.04% 0.04% 0.12% 0.79% 0.00%

0.00% 0.82% 1.47% 0.00% 0.12% 0.10% 0.29% 0.10% 0.67% 3.14% 0.00%

0.00% 1.43% 4.75% 0.25% 0.07% 0.28% 0.60% 0.14% 2.72% 9.89% 0.00%

2.82% 10.09% 21.95% 5.77% 5.11% 6.76% 5.38% 3.98% 12.61% 50.59% 0.00%

0.00% 0.37% 0.28% 0.04% 0.02% 0.02% 0.02% 0.04% 0.06% 0.37% 0.00%

0.45% 3.01% 8.41% 1.60% 1.21% 1.71% 1.69% 1.16% 2.68% 8.53% 0.45%

0.19% 1.51% 3.80% 0.69% 0.54% 0.81% 0.81% 0.59% 1.03% 3.80% 0.19%

* Based on issuer-weighted average default rates and issuer-weighted senior unsecured bond recovery rates.

2014 One-Year Letter Rating Migration Rates

From/To:

Aaa

Aa

A

Baa

Ba

B

Caa

Ca-C

WR

Default

Aaa Aa A Baa Ba B Caa Ca-C

EXHIBIT 25

97.778% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%

2.222% 88.696% 2.712% 0.000% 0.000% 0.000% 0.000% 0.000%

0.000% 6.957% 90.212% 4.342% 0.320% 0.075% 0.000% 0.000%

0.000% 0.000% 2.712% 88.750% 6.080% 0.075% 0.000% 0.000%

0.000% 0.000% 0.000% 2.303% 77.600% 3.219% 0.000% 0.000%

0.000% 0.000% 0.000% 0.132% 7.840% 75.524% 6.516% 0.000%

0.000% 0.000% 0.000% 0.000% 0.320% 7.186% 71.388% 4.348%

0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 1.558% 39.130%

0.000% 4.348% 4.245% 4.408% 7.680% 13.698% 15.297% 13.043%

0.000% 0.000% 0.118% 0.066% 0.160% 0.225% 5.241% 43.478%

Average One-Year Letter Rating Migration Rates, 1920-2014

From/To:

Aaa

Aa

A

Baa

Ba

B

Caa

Ca-C

WR

Default

Aaa Aa A Baa Ba B Caa Ca-C

86.500% 1.143% 0.068% 0.037% 0.007% 0.006% 0.000% 0.000%

7.892% 83.509% 2.719% 0.261% 0.078% 0.042% 0.016% 0.023%

0.842% 7.499% 84.207% 4.116% 0.446% 0.137% 0.022% 0.131%

0.157% 0.833% 5.725% 82.112% 5.887% 0.532% 0.145% 0.054%

0.033% 0.182% 0.715% 4.743% 73.528% 5.420% 0.656% 0.463%

0.001% 0.040% 0.119% 0.745% 6.894% 71.603% 8.186% 2.910%

0.001% 0.006% 0.029% 0.119% 0.599% 5.779% 64.528% 7.772%

0.000% 0.005% 0.008% 0.013% 0.059% 0.472% 3.439% 50.594%

4.573% 6.716% 6.319% 7.596% 11.325% 12.775% 12.284% 12.720%

0.000% 0.068% 0.091% 0.256% 1.177% 3.233% 10.724% 25.332%

25 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 26

Average One-Year Letter Rating Migration Rates, 1970-2014

From/To:

Aaa

Aa

A

Baa

Ba

B

Caa

Ca-C

WR

Default

Aaa Aa A Baa Ba B Caa Ca-C

EXHIBIT 27

87.325% 0.887% 0.047% 0.035% 0.007% 0.008% 0.000% 0.000%

8.150% 84.545% 2.413% 0.159% 0.050% 0.025% 0.014% 0.000%

0.621% 8.446% 86.146% 3.961% 0.328% 0.106% 0.014% 0.056%

0.000% 0.495% 5.538% 85.420% 5.592% 0.293% 0.095% 0.000%

0.028% 0.066% 0.538% 3.834% 75.783% 4.421% 0.365% 0.349%

0.002% 0.021% 0.107% 0.707% 7.327% 73.565% 8.370% 1.939%

0.002% 0.008% 0.033% 0.148% 0.584% 6.069% 63.553% 8.915%

0.000% 0.001% 0.004% 0.015% 0.062% 0.546% 3.447% 36.537%

3.873% 5.510% 5.118% 5.559% 9.264% 11.515% 12.340% 15.039%

0.000% 0.021% 0.057% 0.162% 1.004% 3.450% 11.802% 37.165%

Average Five-Year Letter Rating Migration Rates, 1970-2014*

From/To:

Aaa

Aa

A

Baa

Ba

B

Caa

Ca-C

WR

Default

Aaa Aa A Baa Ba B Caa Ca-C

* Last cohort formed on 1/1/2010

51.499% 2.662% 0.182% 0.172% 0.039% 0.029% 0.000% 0.000%

23.500% 44.233% 7.264% 0.979% 0.155% 0.041% 0.000% 0.000%

5.207% 21.701% 49.713% 11.626% 1.940% 0.241% 0.017% 0.000%

0.388% 4.304% 14.618% 47.929% 12.010% 1.613% 0.528% 0.000%

0.325% 0.775% 2.613% 8.314% 26.702% 6.395% 1.480% 0.000%

0.036% 0.289% 0.859% 2.650% 10.871% 21.921% 8.190% 3.099%

0.036% 0.100% 0.190% 0.529% 1.479% 5.387% 10.028% 1.852%

0.000% 0.011% 0.006% 0.065% 0.113% 0.616% 0.977% 3.982%

18.922% 25.601% 23.775% 26.211% 39.084% 45.843% 43.270% 38.366%

0.088% 0.323% 0.779% 1.525% 7.606% 17.914% 35.510% 52.701%

26 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 28

2014 One-Year Alphanumeric Rating Migration Rates*

From/To: Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C

Aaa

Aa1

Aa2

Aa3

A1

A2

A3

Baa1

Baa2

Baa3

Ba1

Ba2

Ba3

B1

B2

B3

Caa1

Caa2

Caa3

Ca-C

WR 2.273 2.174 5.714 5.714 3.226 4.178 4.714 6.593 8.556 7.813

Default 0.000 0.000 0.000 0.476 0.000 0.000 0.000 0.206 0.000 0.000 0.391

97.778 2.222 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 97.727 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

2.174 91.304 4.348 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

3.571 79.286 10.714 0.714

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.476

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.792 4.178

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.836 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

2.041

1.010

0.168 1.031

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.206 1.099

1.099 0.535

0.549 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

1.953 1.942

0.391 0.647 2.764

0.535

0.000

0.000 0.000 0.000 1.005

0.000 0.000

0.000 0.000 0.000 10.952 77.619 4.762 0.000 0.000 0.000 0.000

8.602 83.871 2.509

0.000 0.000 0.000 0.000 0.000 13.092 77.716 0.000 0.000 0.000 0.000 0.000

0.227 13.605 70.748 9.297 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 4.082 0.000

0.206 0.000 0.000 0.000 0.000 0.000 4.330

0.000 0.000 0.000 0.000 0.000 0.000 0.842 12.458 73.737 7.071 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.549 0.391 0.251

1.649 11.753 75.876 4.742

5.882 0.781 0.324

0.000 0.549 13.187 68.681 7.692 0.000 0.000

1.563 1.294

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

6.417 69.519 8.556

1.618 0.251 0.159

7.813 63.281 12.891 2.734

8.414 65.049 7.767 1.508 0.000

0.318 0.214

0.000 0.000 0.000 12.945 0.000

0.000 0.000 12.312 0.754 0.000 0.000 14.944 0.000 1.709

0.427 14.530 2.137 2.151

16.667 5.914

0.000 0.000 0.000 0.000 8.543 63.819 8.794

0.427 0.538

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 6.995 65.024 10.970 1.590

8.547 63.889 8.120

1.923

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.075 13.441 51.613 8.602

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 5.769 34.615 9.615 17.308 30.769

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 4.348 0.000 39.130 13.043 43.478

* Data in percent.

27

MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 29

Average One-Year Alphanumeric Rating Migration Rates, 1983-2014*

From/To: Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C

Aaa

Aa1

Aa2 2.501

Aa3 0.521 6.186

A1 0.317 1.763

A2 0.130 0.713 1.593 3.635

A3 0.022 0.103 0.519 0.951 3.020

Baa1 0.222 0.111 0.269 0.739 2.980

Baa2 0.031 0.229 0.327 0.417 1.022 3.054

Baa3

Ba1 0.017 0.034 0.024 0.222 0.215 0.504 0.710 1.423

Ba2 0.017 0.021 0.027 0.147 0.125 0.161 0.386 0.533 2.284

Ba3

B1

B2

B3

Caa1

Caa2

Caa3

Ca-C

WR 4.656 6.182 6.162 5.910 5.639 5.473 6.152 5.731 5.936 6.401 9.358

Default 0.000 0.000 0.000 0.048 0.075 0.065 0.053 0.144 0.152 0.242 0.597

86.126 5.688 1.012 0.133 0.063 0.064 0.016 0.022 0.037 0.040 0.024 0.000 0.025

0.000 0.000 0.000

0.070 0.146 0.185 0.443 1.043 2.596

0.000 0.002 0.000 0.030 0.050 0.130 0.191 0.290 0.484 1.057 3.915

0.017 0.028 0.073 0.051 0.098 0.302 0.375 0.727 1.418 2.820

0.000 0.000 0.000 0.009 0.006 0.000 0.029 0.027 0.051 0.081 0.261 0.314 1.022 2.004 4.478

0.010 0.012 0.021 0.041 0.094 0.255 0.644 0.909 2.027 3.904

0.000 0.033

0.002 0.000 0.000 0.026 0.000 0.004 0.007 0.032

0.004 0.000 0.006 0.000 0.007 0.013 0.065 0.109 0.081 0.208 0.452 0.989 3.384

0.013 0.018 0.005 0.051

2.004 74.136 8.617

1.264 0.113 0.015 0.050 0.036 0.057 0.010 0.002 0.016 0.011

0.006 0.034 0.000 0.003 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.003 0.000 0.000 0.000

4.122 72.433 10.019 3.612

3.982 74.444 8.779 1.124 0.157 0.083 0.035 0.030 0.025 0.023 0.010 0.014

1.002 0.109 0.068 0.052 0.045 0.023 0.008 0.007 0.007

5.077 74.809 8.198

1.451 0.193 0.143 0.091 0.137 0.029 0.019 0.034 0.015

4.920 75.255 7.972

1.501 0.545 0.195 0.119 0.085 0.137 0.073 0.014

0.086 0.208 6.285 73.520 7.025

2.022 0.433 0.311 0.062 0.105 0.081 0.049

0.006 0.004 0.105 0.146 0.119 0.215 0.515 1.176 3.214

0.014 0.075 0.192 0.207 0.351 0.537 1.460 3.410 9.113

6.450 73.480 7.740

2.156 0.562 0.275 0.133 0.057 0.085 0.031

0.048 0.030 0.006

6.334 74.978 6.385

8.818 71.796 4.749 0.657 0.303 0.138 0.077

3.551 0.712 0.245 0.108

0.094 0.036

2.613 10.080 63.739 4.961

2.240 0.447 0.194 0.055 0.078 0.257

0.000 0.000 8.102 63.097 7.012

2.340 0.557 0.190 0.055 0.078 0.090 0.130

0.087 10.071 0.661 0.079 10.663 1.549 0.291

11.134 2.053

3.145

0.488 11.301

6.651 63.519 6.402

1.802 0.469 0.176 0.321 0.013 0.173

6.830 63.658 6.737

1.978 0.579 0.460 0.128 0.188

0.000 0.000 0.006 0.000 0.004 0.000

0.025

0.000 0.045 7.063 61.388 8.591

1.887 1.054 0.257 0.477

0.029 0.000 0.006 0.048 0.083

0.165

6.721 59.852 7.380

9.296 55.119 3.244 1.721 1.171

2.800 1.590

0.887 12.624 5.179 1.879 11.923 6.461 4.615 12.569 15.666

0.000 0.000 0.000 0.020 0.000 0.040 0.000 0.003 0.040

0.000 0.000 0.000 0.000 0.000 0.009 0.000 0.009 0.048 0.000 0.000 0.000 0.000 0.000 0.000 0.058

8.705 47.361 5.621

3.469

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 8.208 37.136 8.272 14.618 26.500

4.177 34.947 15.580 37.982

0.000 0.000 0.000 0.058

* Data in percent.

28

MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 30

Annual Issuer-Weighted Corporate Default Rates by Letter Rating, 1920-2014*

Year

Aaa

Aa

A

Baa

Ba

B

Caa-C

Inv Grade Spec Grade

All rated

1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.189 0.185 0.000 0.367 0.000 0.395 0.000 0.000 0.293 0.000 0.000 0.670 0.000 0.617 0.000 0.847 0.000 0.855 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.323 0.353 0.165 0.000 0.000 0.141 0.147 0.212 0.000 0.000 0.000 0.269 1.099 0.258 0.306 1.429 0.543 0.505 1.639 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.942 0.648 1.100 0.622 0.126 0.707 0.113 0.000 0.000 0.445 0.401 1.082 0.927 1.771 0.857 1.923 0.327 1.043 1.990 0.995 1.370 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

2.153 0.444 1.078 0.929 2.065 1.745 1.387 1.300 0.164 0.825 0.917 3.005 6.097 11.734 2.529 5.134 1.230 0.994 0.988 0.621 0.431 0.973 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.360 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

4.382 2.683 1.705 2.270 2.705 2.585 2.900 1.980 1.320 0.918 3.163 9.523 13.978 16.147 4.224 4.275 2.385 2.669 1.467 1.744 3.307 0.810 0.787 1.353 0.493 0.000 0.000 0.719 0.000 1.031 0.000 0.000 0.000 0.000 0.000 1.613 0.000 1.266 0.000 0.000

0.000 13.332 7.629 5.932 12.835 14.397 3.704 12.842 10.477 9.733 7.720 31.670 24.062 25.921 16.504 13.024 7.795 9.074 12.808 6.073 11.829 5.071 2.004 0.000 2.551 3.571 0.000 2.778 0.000 8.571 0.000 4.762 0.000 0.000 7.143 0.000 0.000 0.000 0.000 0.000

0.427 0.387 0.506 0.244 0.140 0.321 0.188 0.069 0.000 0.241 0.151 0.502 0.861 0.790 0.586 1.285 0.482 0.619 1.550 0.412 0.592 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

3.009 2.150 1.762 1.705 2.852 2.562 1.909 1.831 0.877 1.401 2.204 7.897 10.989 15.783 5.897 6.253 2.716 2.745 2.595 1.771 3.557 1.710 0.735 0.614 0.665 0.563 0.000 0.636 0.000 1.926 0.000 0.433 0.000 0.000 0.467 0.518 0.000 0.448 0.000 0.000

1.234 1.068 1.007 0.804 1.152 1.171 0.768 0.736 0.363 0.715 1.040 3.804 5.500 8.531 3.405 3.935 1.633 1.722 2.108 1.223 2.470 1.084 0.455 0.370 0.388 0.306 0.000 0.315 0.000 0.837 0.000 0.176 0.000 0.000 0.166 0.166 0.000 0.143 0.000 0.000

29 MARCH 20, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 30

Annual Issuer-Weighted Corporate Default Rates by Letter Rating, 1920-2014*

Year

Aaa

Aa

A

Baa

Ba

B

Caa-C

Inv Grade Spec Grade

All rated

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.645 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.256 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.543 0.000 0.000 0.461 0.000 0.000 0.000 0.294 0.000 0.000 0.000 0.000 0.328 0.000 0.365 0.000 1.038 0.000 0.000 0.627 0.000 0.290 0.000 0.000 0.000 0.000 0.000 0.000 0.133 0.113

1.251 0.599 1.749 1.162 0.000 0.000 0.000 0.000 0.000 0.000 4.237 0.885 0.000 0.000 0.513 1.029 0.995 0.543 1.124 0.513 0.000 0.000 2.777 0.901 0.839 1.414 2.087 2.780 1.250 3.131 3.443 4.965 0.332 0.604 0.265 0.772 0.000 0.195 0.895 1.420

0.000 0.000 1.471 1.471 0.000 0.000 2.439 0.000 0.000 0.000 19.444 0.000 6.897 3.846 7.162 6.158 0.000 3.226 5.405 0.000 5.000 4.397 2.222 6.386 6.817 7.573 11.568 6.525 6.184 8.590 15.986 12.245 9.236 4.661 4.124 4.380 1.446 2.054 4.019 5.139

0.000 8.696 0.000 0.000 0.000 0.000 0.000 0.000 5.000 0.000 50.000 12.500 37.500 37.500 0.000 0.000 0.000 33.333 0.000 0.000 33.333 0.000 23.077 41.667 100.000 0.000 22.222 20.000 27.273 25.000 61.111 45.000 29.534 27.557 5.405 9.206 14.335 15.030 10.327 18.541

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.271 0.000 0.000 0.231 0.000 0.000 0.000 0.110 0.000 0.000 0.000 0.000 0.213 0.000 0.097 0.000 0.246 0.000 0.000 0.305 0.000 0.070 0.000 0.000 0.000 0.000 0.000 0.000 0.045 0.041

0.750 1.072 1.516 1.152 0.000 0.000 0.439 0.000 0.375 0.000 8.678 1.155 1.922 1.280 1.332 1.742 0.868 1.360 1.823 0.435 1.630 0.698 3.544 3.832 3.361 3.470 5.666 4.417 3.555 5.782 10.268 9.464 5.224 3.156 2.148 3.064 1.719 2.145 3.298 5.694

0.245 0.353 0.471 0.351 0.000 0.000 0.122 0.000 0.105 0.000 2.628 0.286 0.453 0.455 0.274 0.360 0.175 0.353 0.353 0.088 0.343 0.162 1.036 0.967 0.938 0.962 1.879 1.592 1.375 2.393 3.762 3.101 1.504 0.891 0.664 1.033 0.588 0.766 1.318 2.413

30 MARCH 20, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 30

Annual Issuer-Weighted Corporate Default Rates by Letter Rating, 1920-2014*

Year

Aaa

Aa

A

Baa

Ba

B

Caa-C

Inv Grade Spec Grade

All rated

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mean Median St Dev Min Max

* Data in percent.

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.724 0.000 0.000 0.000 0.000 0.000 0.000 0.061 0.000 0.188 0.000 0.855

0.000 0.190 0.197 0.000 0.000 0.000 0.000 0.000 0.547 0.221 0.230 0.000 0.000 0.000 0.121 0.096 0.000 0.268 0.000 1.639

0.421 0.217 1.120 0.000 0.000 0.199 0.000 0.000 0.520 0.937 0.000 0.090 0.085 0.073 0.068 0.266 0.000 0.459 0.000 1.990

0.792 1.510 1.516 1.060 0.454 0.000 0.219 0.000 1.220 2.325 0.000 0.198 0.170 0.520 0.169 1.062 0.604 1.643 0.000 11.734

6.253 9.954 4.668 2.190 0.880 1.050 1.215 0.000 2.144 7.529 0.508 0.112 0.485 1.076 0.250 3.356 2.054 4.015 0.000 19.444

19.706 31.968 29.503 23.365 12.772 6.752 6.293 6.090 15.089 34.770 11.888 8.714 11.871 9.573 7.026 13.077 8.696 15.972 0.000 100.000

0.158 0.153 0.495 0.000 0.000 0.078 0.000 0.000 0.547 0.445 0.085 0.042 0.042 0.041 0.078 0.149 0.000 0.275 0.000 1.550

6.685 10.831 8.373 5.611 2.567 1.817 1.862 0.981 4.496 13.320 3.302 2.058 2.995 3.010 2.044 2.833 1.862 3.093 0.000 15.783

2.859 4.355 3.329 2.050 0.943 0.739 0.723 0.402 2.258 6.024 1.413 0.914 1.425 1.446 1.044 1.195 0.768 1.444 0.000 8.531

31 MARCH 20, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 31

Annual Issuer-Weighted Corporate Default Rates by Alphanumeric Rating, 1983-2014*

Year

Aaa

Aa1

Aa2

Aa3

A1

A2

A3

Baa1

Baa2

Baa3

Ba1

Ba2

Ba3

B1

B2

B3

Caa1

Caa2

Caa3

Ca-C

Inv Spec

Grade Grade All rated

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

32

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 1.418 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.139 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.545 0.000 0.435

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.497 0.000 0.000 0.000 0.000 0.000 0.000 0.300 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.515 0.000 0.000 0.000 0.000 0.000 0.000 0.618 0.296

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.800 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.322 0.333 1.204 0.000 0.000 0.000 0.000 0.000 0.294 1.260 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.885 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.348 0.000 0.000 0.290 0.805 0.000 0.000 0.266 0.000 0.000 0.855 0.776 0.000

0.000 1.075 0.000 3.652 0.000 0.000 1.075 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.376 1.093 0.000 1.436 0.000 0.000 0.347 0.000 0.000 0.366 0.776 0.000

0.000 1.205 0.000 0.909 3.788 0.000 0.813 3.727 1.099 0.000 1.010 0.000 0.000 0.000 0.000 0.000 0.595 0.602 0.000 2.766 0.735 0.000 0.000 0.000 0.000 0.000 2.444 0.000

0.000 1.613 1.667 1.176 0.962 0.000 1.942 2.957 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.399 0.613 0.680 1.375 0.685 0.758 0.806 0.000 0.000 0.000 0.000 0.610 0.000

2.600 0.000 2.894 3.533 3.034 2.554 4.956 3.539 9.260 0.781 0.794 0.671 1.953 0.000 0.474 1.288 2.583 1.053 2.952 1.144 1.528 0.518 0.000 0.521 0.000 2.833 3.637 0.000

0.000 11.859 21.053 0.000 53.125 0.000 5.949 11.407 4.478

4.167

0.000

0.000 0.000

0.000 0.000 3.832 0.967 0.938 0.962 1.879 1.592 1.375 2.393

0.000 100.000 0.097 3.361 0.000

0.000 0.000 0.000

0.000 3.470 0.246 5.666 0.000 4.417

8.824 11.364 0.000

7.808 16.268 14.554 0.000 28.571 0.000 4.331 4.237 5.802 8.196 3.613 1.053 2.627 1.991 4.566 1.237 0.000 2.314 2.668 3.248

5.737

11.726 0.000 22.222 0.000

6.679 10.960 0.000 22.222 0.000 7.861 18.603 0.000 27.273 0.000 23.157 28.763 0.000 61.905 0.000 11.141 26.163 0.000 50.000 0.000 1.449 26.882 0.000 31.601 0.000 3.226 10.159 0.000 23.982 0.000 3.568 5.942 0.000 1.227 5.649 5.292 5.133

8.867 1.981 3.422 7.105 4.980

0.000 0.000

7.143 2.632

0.000 0.000

50.000 0.000 3.555 0.000

0.305 5.782

75.000 0.000 10.268 3.762 40.000 0.070 9.464 25.000 0.000 5.224 50.000 0.000 3.156 0.000

0.000 2.148

3.101 1.504 0.891 0.664 1.033 0.588 0.766 1.318 2.413 2.859

24.706 0.000 3.064 13.462 0.000 1.719 18.981 0.000 2.145 16.667 0.045 3.298

0.000 15.316 0.000 0.000 13.944 0.000 5.734

9.285 26.667

8.660 11.981 22.427 20.870 47.368 0.041 5.694 12.223 11.386 30.042 20.139

41.765 0.158 6.685

3.523 10.654 17.850 25.641 35.481 43.704 44.000 0.153 10.831 4.355 2.330 0.362 0.000 0.000 0.777 0.000 1.869 4.148 0.899

4.902 2.484 0.625 0.606 0.574 0.000 0.883 8.978 0.000

7.559 17.338 25.470 34.368 53.932 0.495 8.373 4.507 10.825 21.619 33.840 43.077 0.000 5.611 2.451 2.517 2.314 0.000 3.246

8.473 3.158 2.485 2.258

9.756 14.360 7.498 22.083 6.967

18.713

35.386 0.000 2.567 17.670 0.078 1.817 19.025 0.000 1.862 32.500 0.000 0.981 55.364 0.547 4.496 75.511

3.329 2.050 0.943 0.739 0.723 0.402 2.258

8.600 15.862

7.608 19.845 36.601

8.522 17.284 39.907 58.022 0.629

2.751

11.504 26.331

0.445 13.320 6.024

1.413

36.431 0.085 3.302

MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 31

Annual Issuer-Weighted Corporate Default Rates by Alphanumeric Rating, 1983-2014*

Year

Aaa

Aa1

Aa2

Aa3

A1

A2

A3

Baa1

Baa2

Baa3

Ba1

Ba2

Ba3

B1

B2

B3

Caa1

Caa2

Caa3

Ca-C

Inv Spec

Grade Grade All rated

2011 2012 2013 2014 Mean Median StDev Min Max

EXHIBIT 32

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.111 0.000 0.447 0.000 2.139

0.000 0.000 0.000 0.495 0.077 0.000 0.291 0.000 1.545

0.000 0.000 0.000 0.000 0.025 0.000 0.101 0.000 0.497

0.000 0.000 0.000 0.000 0.045 0.000 0.147 0.000 0.618

0.000 0.261 0.239 0.000 0.147 0.000 0.332 0.000 1.260

0.244 0.000 0.000 0.000 0.140 0.000 0.283 0.000 0.885

0.000 0.000 0.000 0.215 0.325 0.000 0.731 0.000 3.652

0.000 0.000 0.000 0.000 0.615 0.000 1.080 0.000 3.788

0.000 0.000 0.000 0.000 0.539 0.000 0.755 0.000 2.957

0.543 0.490 1.344 0.418 1.809 1.216 1.911 0.000 9.260

0.000 0.000 0.000 0.000 2.438 2.152 2.371 0.000 8.196

0.365 0.923 1.255 0.830 5.234 4.235 5.430 0.000

0.000 0.432 1.551 0.000 8.850 7.332 8.290 0.000

2.128 13.752 19.373 38.095 0.042 2.058 61.401 0.042 2.995

0.914 1.425 1.446 1.044 1.752 1.394 1.257 0.402

4.183 13.926 24.227 1.187 2.375

9.810 36.098 66.632 0.041 3.010 6.552 33.345 47.388 0.078 2.044

35.293 0.093 4.569 37.263 0.041 3.416 25.459 0.151 2.992 0.000

0.000 0.981

4.275 20.387 15.144 1.658 17.580 15.111 6.433 15.287 16.580 0.000

0.000

0.000

23.157 28.763 25.641 61.905 58.022 100.000 0.547 13.320 6.024

* Data in percent.

Average Cumulative Issuer-Weighted Global Default Rates by Letter Rating, 1920-2014*

Rating

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Aaa Aa A Baa Ba B Caa-C Inv Grade Spec Grade All rated

* Data in percent.

0.000 0.009 0.072 0.212 0.030 0.342 0.627 1.454 5.186 12.796 29.824 0.848 11.365 4.740

0.083 0.536 0.986 2.146 7.314 0.161 0.827 1.374 2.873 9.339 0.244 1.161 1.784 3.595

0.351 1.491 2.225 4.286

0.499 1.805 2.669 4.989

0.654 2.101 3.145 5.721

0.834 2.441 3.616 6.454

0.989 2.830 4.093 7.175

1.117 3.251 4.560 7.895

1.251 3.668 4.975 8.625

1.291 4.067 5.385 9.289

1.327 4.363 5.863 9.884

1.399 4.592 6.286

1.472 4.797 6.644

1.531 5.041 7.005

1.600 5.338 7.340

1.647 5.587 7.680 12.634 30.290 46.082 69.308 8.498 40.388 17.937

0.098 0.304 0.276 1.328 3.590

0.818 3.158 8.195

10.506 11.092 26.261 27.391 42.765 43.942 63.653 65.238 7.062

7.435

11.612 12.108 28.450 29.393 44.914 45.616 66.666 67.994 7.793

8.146

11.265 13.020 23.809 26.812 43.138 45.841 2.231

2.715

14.727 16.358 29.335 31.547 48.152 50.418 3.202

3.706

18.072 19.599 33.497 35.242 52.361 54.312 4.218

4.734

21.121 22.594 36.889 38.473 56.287 58.133 5.250

5.746

23.913 25.135 40.005 41.414 59.986 61.866 6.206

6.647

16.895 20.545 35.335 39.769 1.276

1.747

13.343 22.736 0.156 3.812 1.570

0.465 7.711 3.206

14.632 17.512 6.115

7.345

20.052 22.317 8.441

9.425

24.329 26.173 10.319 11.163

27.941 29.532 11.980 12.746

31.086 32.579 13.492 14.202

33.964 35.258 14.854 15.467

36.471 37.624 16.039 16.562

38.671 39.571 17.050 17.503

33 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 33

Average Cumulative Issuer-Weighted Global Default Rates by Letter Rating, 1970-2014*

Rating

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Aaa Aa A Baa Ba B Caa_C Inv Grade Spec Grade All rated

* Data in percent.

0.000 0.013 0.013 0.137 0.430 0.877 5.208

0.036 0.102 0.166 0.552 1.277 2.290

0.235 0.691 1.620 2.763

0.309 0.390 0.808 0.905 1.993 3.252

2.378 3.801

0.475 1.019

0.567 1.159

0.665 1.338 3.430 5.748

0.766 1.546 3.765 6.459

0.822 0.882 1.712 4.114 7.185

1.836 4.528 7.898

0.946 1.971 4.949 8.679

1.014 2.140 5.416 9.431

1.038 2.363 5.920

1.038 2.712 6.377

1.038 3.058 6.859 11.389 34.250 53.558 72.044 7.000 46.142 17.171

0.022 0.068 0.061

0.198

0.258 0.405 0.672 1.336 7.591

0.961 1.802 9.745

2.744 3.093 4.425

5.074

0.168 0.486 1.079 3.706

2.983 8.861

10.136 10.769 31.870 33.169 51.841 52.653 72.044 72.044 6.126

6.560

11.738 13.479 27.104 30.818 51.231 54.772 1.424

1.752

15.216 16.945 33.940 36.725 58.084 61.373 2.093

2.452

18.728 20.536 39.164 41.173 63.918 65.712 2.828

3.208

22.376 24.129 43.084 44.879 66.955 68.606 3.596

3.996

25.859 27.591 46.692 48.330 69.272 70.087 4.392 4.800 39.080 40.603 14.025 14.594

29.183 30.633 49.682 50.731 71.627 72.044 5.229

5.674

14.132 18.804 23.095 34.276 0.511 13.292 4.959

41.169 46.973 0.792

1.100

14.951 25.658 0.090 0.268 4.338 8.920 1.657 3.368

17.151 20.533 6.329

7.505

23.497 26.094 8.522 9.405

28.379 30.482 10.187 10.916

32.422 34.178 11.602 12.237

35.887 37.504 12.852 13.449

41.974 43.163 15.149 15.682

44.209 45.242 16.196 16.691

EXHIBIT 34

Average Cumulative Issuer-Weighted Global Default Rates by Letter Rating, 1983-2014*

Rating

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Aaa Aa A Baa Ba B Caa Ca-C Inv Grade Spec Grade All rated

* Data in percent.

0.000 0.016 0.025 0.076 0.068 0.225 0.183 0.522 1.098 3.150 3.691 8.899 12.348 22.844 42.529 55.272 0.098 0.291 4.527

9.371

1.825 3.734

0.016 0.155 0.493 0.916 5.624

0.047 0.083 0.288 0.444 0.769

1.101

1.373 1.849 8.243 10.463

0.126 0.173 0.572 0.681 1.457

1.841

2.337 2.798 12.505 14.318 27.362 31.123 48.851 52.492 77.870 80.488 1.497 1.826 24.882 27.657 9.462 10.421

0.178 0.178 0.772 0.862 2.249 2.644 3.258 3.722 16.048 17.663 34.270 36.995 55.797 59.631 83.856 84.977 2.156 2.481 30.050 32.169 11.243 11.965

0.178 0.178 0.985

1.141

2.998 3.318 4.244 4.808 19.268 20.833 39.346 41.245 63.124 65.723 84.977 84.977 2.810

3.141

34.063 35.692 12.617 13.196

0.178 0.178 1.349 1.562 3.626 3.955 5.379 6.052 22.430 23.973 43.092 44.886 67.645 70.488 84.977 84.977 3.476 3.845 37.276 38.809 13.752 14.310

0.178 0.178 1.708 1.842 4.345 4.814 6.739 7.400 25.642 27.315 46.710 48.294 71.747 73.882 84.977 84.977 4.223 4.622 40.378 41.860 14.870 15.421

0.178 0.178 1.980 2.154 5.308 5.873 8.175 8.965 28.677 29.926 49.454 50.576 78.289 79.592 84.977 84.977 5.055 5.525 43.049 44.118 15.944 16.472

0.178 0.178 2.433 2.842 6.523 7.026 9.688 10.344 31.044 32.445 52.012 53.076 79.592 79.592 84.977 84.977 6.037 6.499 45.174 46.303 17.027 17.548

0.178 3.198 7.537 10.848 33.429 54.295 79.592 n.a. 6.915 47.215 18.000

14.232 18.942 23.283 31.429 38.425 44.373 64.645 0.548 5.523

71.461 76.352 0.842

1.167

14.043 18.165 21.740

7.053 8.351

34 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 35

Average Cumulative Issuer-Weighted Global Default Rates by Alphanumeric Rating, 1983-2014*

Rating

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C Inv Grade Spec Grade All rated

* Data in percent.

0.000 0.016 0.016 0.000 0.151 0.223 0.563 0.421 0.508 0.681 0.830 1.299 3.562 3.646 8.517 10.593 13.899

0.047 0.083 0.085

0.156

0.126 0.234 0.606 0.693 1.461 1.423 1.492 1.639 2.248 3.293

0.173 0.239 0.742 0.827 1.710 1.908 1.889 1.939 2.699 3.976

0.178 0.239 0.893

0.178 0.239 1.063

0.178 0.239 1.253 1.114 2.345

0.178 0.239 1.465 1.294 2.599

0.178 0.239 1.699 1.563 2.859

0.178 0.375 1.906 1.808 3.146

0.178 0.541 2.001 1.981

0.178 0.728 2.105 2.113

0.178 0.796 2.299 2.239 4.348 5.800 5.707 5.645 8.474

0.178 0.796 2.557 2.418 4.798 6.550 6.166 6.307 9.185

0.178 0.796 2.845 2.793 5.219 7.343 6.897

0.178 0.796 3.250 3.355 5.447 7.920 7.627

0.178 0.796 3.504 3.924 5.688 8.492 8.372 7.040 11.410 14.855 26.506 25.106 46.053 55.713 50.294 52.879 n.a. 79.171 n.a. n.a. 6.915 47.215 18.000

0.000 0.000 0.000 0.050 0.086

0.017 0.146 0.267

0.323 0.485 0.351 0.857

0.541 1.171

0.914 0.988 1.911 2.440

2.115 2.945

3.511 3.909 4.838 4.593

5.292 5.166

0.066 0.206 0.055

0.207

0.682 0.989 0.785 1.005 1.323 1.869 5.346 5.392

1.161 1.323 1.755 2.596 7.019 6.961

3.417 3.806 3.143 3.448 2.564 2.864 4.222 4.985 6.418

7.073

4.107 4.433 3.816 3.296

4.195 3.790

2.353 2.806 2.160 2.340 3.113 4.812

3.612 5.609

0.147 0.403 0.161 0.252 0.651 0.723 1.679 2.229 3.407

0.467 0.731 1.947 2.023 4.807 6.221 8.631

4.269 4.863 7.189

7.860

6.715 6.850 10.018 10.909 13.045 14.007 22.866 25.068 24.931 25.106 43.271 44.721 51.790 53.539 49.940 50.294 52.879 52.879 n.a.

n.a.

5.777 6.504 7.531

8.378

9.346 10.082 17.776 19.104 19.816 21.835 36.924 38.786 45.543 47.200 43.372 45.288 51.349 52.231 74.049 74.049 70.072 72.861 81.831

n.a.

11.051 12.089 20.177 21.363 23.255 24.509 40.552 41.977 48.622 50.256 46.819 47.694 52.231 52.480 74.049

n.a.

8.797 10.190 8.175 9.446 18.358 20.928 22.525 26.630 26.812 30.260 33.960 37.732 41.779 45.165 55.133 59.107 67.668 71.383 77.870 80.488 1.497

1.826

11.213 12.150 10.840 12.103 23.533 26.041 30.030 33.001 33.183 36.047 40.943 43.050 48.127 52.362 62.411 65.698 75.858 78.847 83.856 84.977 2.156

2.481

13.229 14.484 13.234 14.687 28.513 30.484 35.819 38.111 38.241 39.808 44.784 46.575 56.541 60.254 68.124 70.072 81.831 81.831 84.977 84.977 2.810

3.141

15.931 16.938 16.357 18.158 32.219 34.190 40.540 43.039 40.924 42.102 48.733 50.109 64.403 71.052 70.072 70.072 81.831 81.831 84.977 84.977 3.476 3.845 37.276 38.809 13.752 14.310

12.383 15.494 14.553 18.605 18.734 22.895

5.500 12.073 6.836 15.698 16.723 28.485 28.992 44.359 42.529 55.272 0.098 4.527 1.825

0.291 9.371 3.734

18.674 24.260 29.314 23.835 30.832 37.233 37.748 45.022 50.338 53.252 59.306 64.889 64.645 0.548 14.043 5.523

71.461 76.352 0.842

1.167

77.841 79.171 n.a.

n.a.

79.171 79.171 n.a.

n.a.

84.977 84.977 4.223

4.622

84.977 84.977 5.055

5.525

84.977 84.977 6.037 6.499 45.174 46.303 17.027 17.548

18.165 21.740 7.053

8.351

24.882 27.657 9.462 10.421

30.050 32.169 11.243 11.965

34.063 35.692 12.617 13.196

40.378 41.860 14.870 15.421

43.049 44.118 15.944 16.472

35 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 36

Average Cumulative Issuer-Weighted Global Default Rates by Alphanumeric Rating, 1998-2014*

Rating/Year

1

2

3

4

5

6

7

8

9

10

Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C Inv Grade Spec Grade All rated

* Data in percent.

0.000 0.000 0.000 0.052 0.151 0.105 0.072 0.178 0.188 0.273 0.420 0.647 1.060 1.435 2.942 4.000 6.843 16.349 29.335 46.937 0.131 4.599 1.993

0.035 0.000 0.014 0.154 0.362 0.306 0.246 0.458 0.491 0.737 1.656 1.521 3.089 4.752 7.768 10.037 15.682 28.988 44.688 60.715 0.354 9.529 4.071

0.035 0.000 0.206 0.227 0.653 0.585 0.605 0.730 0.823 1.281 2.993 2.637 5.476 8.589 12.832 16.609 23.785 38.882 53.679 70.570 0.638 14.251 5.999

0.035 0.000 0.424 0.371 1.025 0.852 0.972 1.028 1.198 1.804 4.200 3.894 8.123 11.965 17.600 21.929 30.686 46.074 59.629 76.794 0.942 18.229 7.573

0.035 0.054 0.571 0.635 1.510 1.250 1.457 1.263 1.481 2.424 5.499 4.920 9.919 14.821 21.205 26.610 37.072 51.585 65.068 80.289 1.289 21.415 8.831

0.035 0.176 0.740 0.873 1.964 1.868 1.761 1.553 1.828 2.827 6.792 5.789 11.623 17.431 24.674 30.864 41.678 56.261 67.035 80.900 1.633 24.109 9.876

0.035 0.187 0.939 1.138 2.412 2.492 2.221 1.810 2.139 3.344 7.958 6.602 13.179 20.246 27.785 34.495 45.101 60.307 69.745 82.118 2.002 26.477 10.799

0.035 0.187 1.176 1.290 2.785 3.231 2.809 2.075 2.400 4.160 8.975 7.951 15.298 22.851 30.395 37.694 48.077 63.368 73.217 84.800 2.414 28.677 11.669

0.035 0.187 1.462 1.446 3.142 4.054 3.474 2.290 2.747 5.002 10.160 8.987 17.766 25.424 33.047 40.124 51.926 65.719 74.264 86.336 2.859 30.785 12.508

0.035 0.187 1.812 1.652 3.560 4.972 4.084 2.626 3.108 6.083 11.616 10.415 20.084 28.185 35.014 41.600 56.195 65.719 74.264 86.336 3.363 32.677 13.317

EXHIBIT 37

Average Cumulative Issuer-Weighted Global Default Rates by Broad Industry Group, 1970-2014*

Broad Industry Group

1

2

3

4

5

6

7

8

9

10

Banking Capital Industries Consumer Industries Energy & Environment Non-Bank Finance Media & Publishing Retail & Distribution Government Related Issuers Technology Transportation Utilities

* Data in percent.

0.616 2.169 2.503 1.600 0.781 3.926 2.803 0.259 1.903 2.391 0.146

1.279 4.523 5.136 3.163 1.627 7.980 5.752 0.552 3.862 4.478 0.286

1.968 6.779 7.571 4.538 2.447 11.880 8.605 0.725 5.602 6.311 0.419

2.608 8.823 9.675 5.652 3.179 15.215 11.027 0.851 6.992 7.892 0.543

3.193 10.616 11.456 6.631 3.832 18.267 13.168 0.996 8.046 9.244 0.666

3.750 12.197 13.010 7.481 4.468 20.869 15.025 1.009 8.821 10.439 0.790

4.260 13.640 14.360 8.170 5.099 22.963 16.529 1.009 9.471 11.440 0.902

4.760 14.965 15.528 8.716 5.722 24.687 17.908 1.009 9.974 12.390 1.002

5.237 16.176 16.639 9.245 6.381 26.186 19.297 1.009 10.374 13.305 1.109

5.725 17.274 17.610 9.733 7.089 27.650 20.637 1.009 10.732 14.281 1.223

36 MARCH 20, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 38

Annual Default Rates by Broad Industry Group, 1970-2014*

Year

Banking

Capital Industries

Consumer Industries

Energy & Environment

Non-Bank Finance

Media & Publishing

Retail & Distribution

Gov't-Related

Issuers

Technology

Transportation

Utilities

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

37

MARCH 4, 2014

n.a. n.a. n.a. n.a. n.a. 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.410 2.053 2.195 2.775 2.148 0.539 0.491 0.000 0.000 0.000 0.000

0.000 0.000 0.353 0.360 0.355 0.369 0.352 0.000 0.000 0.000 0.375 0.366 1.106 1.415 0.708 1.214 3.377 2.433 0.762 3.190 4.904 3.551 2.011 1.650 0.427 1.353 0.706 0.480

0.926 0.000 0.000 0.000 0.000 0.769 0.735 0.746 0.746 0.000 0.000 0.000 0.000 0.565 1.081 1.391 1.582 2.463 2.584 4.320 8.590 3.711 3.017 1.157 0.971 2.930 1.318 2.307

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.176 0.000 1.124 0.000 0.917 2.382 3.894 3.338 7.068 5.393 1.394 0.000 1.320 1.320 0.658 1.270 0.625 0.568 1.005 0.000

16.667 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.220 0.000 0.000 0.629 3.528 0.000 0.543 0.532 0.000 0.000 1.288 0.000 0.314

0.000 0.000 0.000 0.000 0.000 4.167 0.000 4.000 0.000 0.000 0.000 0.000 4.000 0.000 0.000 0.000 3.511 1.351 3.346 5.811 7.479 4.209 7.341 2.857 1.316 0.000 2.679 1.418

0.000 0.000 0.000 3.030 3.078 1.563 0.000 0.000 1.639 0.000 0.000 0.000 4.814 0.000 0.000 0.000 1.000 1.845 1.681 0.800 5.675 10.195 2.487 2.518 2.771 1.876 0.621 3.452

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 11.111 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.833 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.725 0.709 0.690 0.000 1.841 0.617 1.779 0.559 0.521 0.455 1.205 1.210 2.421 1.711 1.284 0.457 1.242 0.738 0.709 0.596

15.484 2.314 3.053 1.613 0.000 0.000 0.000 1.786 0.000 0.000 0.926 0.909 1.951 3.912 1.031 0.971 2.770 0.893 0.000 1.802 5.744 9.102 0.000 0.000 1.896 0.917 0.000 0.855

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.424 0.422 0.000 0.000 1.324 0.870 0.000 0.000 0.000 0.000 0.000

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 38

Annual Default Rates by Broad Industry Group, 1970-2014*

Year

Banking

Capital Industries

Consumer Industries

Energy & Environment

Non-Bank Finance

Media & Publishing

Retail & Distribution

Gov't-Related

Issuers

Technology

Transportation

Utilities

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

* Data in percent.

0.149 0.281 0.000 0.136 0.587 0.147 0.000 0.131 0.000 0.000 1.097 1.860 0.699 0.804 1.073 2.002 0.838

1.099 2.344 4.340 7.640 2.960 2.669 1.586 1.374 1.380 0.748 3.232 10.833 1.449 0.816 1.452 1.430 1.673

2.478 4.747 6.825 5.920 2.192 2.276 2.308 0.730 1.065 0.688 4.049 8.087 1.910 0.744 2.227 1.669 0.473

1.502 5.727 1.369 2.076 4.278 1.316 0.310 0.968 0.000 0.000 1.717 2.033 2.313 1.418 1.829 2.115 1.298

1.051 0.704 0.925 1.384 0.460 0.660 0.231 0.221 0.439 0.000 2.205 3.802 0.947 0.672 0.657 0.418 0.396

2.837 3.333 1.865 3.767 10.451 3.886 1.635 0.000 1.557 1.056 4.541 23.087 3.831 1.769 4.388 4.835 1.106

5.917 2.880 5.898 8.356 3.828 4.471 1.180 1.895 1.140 1.837 2.287 4.821 3.897 2.448 1.634 1.039 1.765

0.000 2.941 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.780 2.027 2.792 8.009 9.237 4.950 0.861 0.248 0.794 0.480 1.266 5.530 1.320 0.000 1.414 1.149 1.987

0.758 5.474 4.169 4.286 6.408 3.348 1.778 4.205 2.543 0.000 3.216 6.183 0.926 6.228 0.909 1.762 0.741

0.000 0.338 0.000 0.601 0.569 0.561 0.264 0.262 0.000 0.000 0.000 0.251 0.240 0.000 0.446 0.000 0.000

38 MARCH 4, 2014

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 39

Annual Volume-weighted Corporate Bond Default Rates by Letter Rating, 1994-2014*

Year

Aaa

Aa

A

Baa

Ba

B

Caa-C

Inv-Grade

Spec-Grade

All- Rated

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mean Median StDev Min Max

* Data in percent

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.816 0.000 0.000 0.000 0.000 0.000 0.000 0.039 0.000 0.178 0.000 0.816

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.692 2.718 0.000 0.000 0.000 0.000 0.000 2.370 0.014 0.151 0.000 0.000 0.000 0.023 0.284 0.000 0.768 0.000 2.718

0.000 0.000 0.000 0.000 0.000 0.140 0.623 0.957 2.298 0.000 0.000 0.201 0.000 0.000 1.108 0.642 0.000 0.005 0.018 0.069 0.000 0.289 0.000 0.572 0.000 2.298

0.141 0.567 0.000 0.051 0.654 1.143 1.039 1.178 4.872 3.622 0.000 0.000 0.033 0.000 8.097 2.599 0.000 0.224 0.000 0.000 0.108 1.158 0.141 2.069 0.000 8.097

1.971 4.651 1.624 3.064 3.023 5.483 6.069 13.898 15.699 2.560 0.258 1.639 1.062 0.000 1.287 6.416 0.083 0.047 0.218 0.131 0.202 3.304 1.639 4.344 0.000 15.699

2.797 6.876 22.529 7.111 13.225 20.515 20.723 55.371 75.944 17.170 9.190 16.473 4.008 3.655 11.019 40.318 6.283 8.473 10.236 6.631 9.665 17.534 10.236 18.434 2.797 75.944

0.000 0.000 0.000 0.000 0.000 0.031 0.137 0.532 1.859 0.000 0.000 0.073 0.000 0.000 1.466 0.187 0.072 0.002 0.007 0.029 0.010 0.210 0.007 0.501 0.000 1.859

1.220 3.088 2.309 1.950 2.872 5.783 5.857 15.646 21.363 5.689 1.879 3.787 1.050 0.602 5.807 16.759 1.698 1.766 1.883 1.170 1.764 4.950 2.309 5.758 0.602 21.363

0.249 0.716 0.659 0.504 0.853 1.114 1.350 3.006 4.895 0.994 0.328 0.754 0.212 0.117 2.221 2.808 0.344 0.335 0.367 0.267 0.394 1.071 0.659 1.206 0.117 4.895

EXHIBIT 40

Average Volume-weighted Corporate Bond Default Rates by Letter Rating, 1994-2014*

Rating / Year

1

2

3

4

5

Aaa Aa A Baa Ba B Caa-C Inv-Grade Spec-Grade All Rated

*Data in percent

0.000 0.026 0.312 0.231 0.828 3.009 15.611 0.220 4.363 1.004

0.048 0.078 0.614 0.504 2.172 7.295 25.009 0.452 8.382 1.940

0.048 0.115 0.873 0.709 3.545 11.080 31.704 0.636 11.730 2.701

0.048 0.165 1.071 1.059 4.907 14.332 34.191 0.838 14.106 3.294

0.048 0.245 1.327 1.562 5.683 16.458 35.697 1.116 15.595 3.787

39 MARCH 20, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

CREDIT POLICY

EXHIBIT 41

Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2014 (Data in Percent)

1/1/70

Rating

n(0)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Aaa Aa A Baa Ba B Caa-C IG SG All 1/1/71

Rating

39 78 254 372 238

0.000 0.000 0.000 0.543 4.237

0.000 0.000 0.000 0.543 5.120

0.000 0.000 0.000 0.543 5.565

0.000 0.000 0.413 1.123 6.050

0.000 0.000 0.413 1.415 7.042

0.000 0.000 0.835 1.415 8.072

0.000 0.000 0.835 1.728 8.606

0.000 0.000 0.835 2.368

0.000 0.000 0.835 3.038

0.000 0.000 0.835 3.038

0.000 0.000 1.292 3.396

0.000 0.000 1.292 3.396

0.000 0.000 1.292 4.584

0.000 1.429 1.292 4.992

0.000 1.429 1.292 5.418

0.000 1.429 1.292 5.864

0.000 2.922 1.796 7.256

2.703 2.922 1.796 8.313

2.703 2.922 2.869 9.398

2.703 2.922 2.869 9.994

9.208 10.456 10.456 10.456 12.020 14.560 15.489 15.489 17.575 21.076 23.608 23.608 25.077

36 19.444 19.444 22.321 22.321 22.321 22.321 22.321 22.321 22.321 22.321 22.321 22.321 30.498 30.498 30.498 30.498 36.290 36.290 36.290 36.290 16 50.000 56.250 75.000 81.250 81.250 81.250 81.250 90.625 90.625 90.625 90.625 90.625 90.625 90.625 90.625 90.625 90.625 90.625 90.625 90.625 743 290 1033

0.271 8.678 2.628

0.271 2.926

0.271 3.430

0.697 3.951

0.840 4.267

0.987 4.593

1.137 4.816

1.441 5.277

1.754 5.752

1.754 5.752

2.085 6.008

2.085 6.270

2.608 7.361

2.962 7.783

3.145 7.929

3.332 8.379

4.297

4.912

5.755

5.977

9.764 11.601 12.382 13.192 14.035 14.471 15.443 16.450 16.450 16.450 17.693 21.008 21.733 21.733 23.347 26.969 28.932 28.932 30.097

9.787 10.621 11.308 11.673

n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa Aa A Baa Ba B Caa-C IG SG All

40 75 282 398 228 27 795 263 1058

0.000 0.000 0.000 0.000 0.885 0.000 0.000 1.155 0.286

0.000 0.000 0.000 0.000 1.332 3.846 0.000 3.112 0.769

0.000 0.000 0.366 0.534 1.815 3.846 0.394 3.942 1.267

0.000 0.000 0.366 0.802 2.810 3.846 0.525 4.806 1.570

0.000 0.000 0.739 1.075 3.844 3.846 0.796 5.706 1.986

0.000 0.000 0.739 1.366 4.381 3.846 0.935 6.173 2.200

0.000 0.000 0.739 1.966 4.986 3.846 1.218 7.216 2.645

0.000 0.000 0.739 2.595 6.241 3.846 1.509 8.295 3.103

0.000 0.000 0.739 2.595 6.241 3.846 1.509 8.295 3.103

0.000 0.000 1.140 2.930 6.241 3.846 1.816 8.295 3.349

0.000 0.000 1.140 2.930

0.000 0.000 1.550 4.059

0.000 0.000 1.964 4.445

0.000 0.000 1.964 4.849

0.000 0.000 1.964 5.272

0.000 0.000 2.401 6.588

2.703 0.000 2.401 7.577

2.703 0.000 3.326 8.592

2.703 0.000 3.326

2.703 1.786 3.326

9.143 10.308

7.798 10.322 11.247 11.247 13.311 17.937 20.487 20.487 21.959 21.959 3.846 15.865 15.865 15.865 15.865 23.514 23.514 23.514 23.514 23.514 1.816 3.602

2.467 4.788

2.798 5.195

2.968 5.336

3.142 5.769

3.862 7.124

4.433 7.924

5.215 8.583

5.421 8.933

6.063 9.482

8 12.500 50.000 62.500 62.500 62.500 62.500 81.250 81.250 81.250 81.250 81.250 81.250 81.250 81.250 81.250 81.250 81.250 81.250 81.250 81.250

9.620 13.174 13.950 13.950 15.671 20.478 22.588 22.588 23.837 23.837

40 MARCH 4, 2015

SPECIAL COMMENT: ANNUAL DEFAULT STUDY: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2014

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