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com

Turn in the credit cycle echoes around the world Moody’s Financial Conditions Indicators2
reveal synchronized tightening
across countries
Corporate default rate is moving up toward
the long-term trend
Baseline (no recession) Global historical average (1983 - 2021)

Conditions weaken as inflation rises, interest rates move higher and growth slows Euro area US EM UK Optimistic scenario
Moderate pessimistic scenario
Tighter conditions Looser conditions
Severe pessimistic scenario
Inflation is surging across most G-20 economies -0.8 -0.4 0 0.4 0.8 1
Latest inflation1 (YOY) Jul ’21 Global historical Forecast period
14%

12% 12.4%

12-month speculative-grade default rate

GERMANY
8.5% Sep ’21 10%
UK
9.4% RUSSIA
8%
CANADA 15.9% 6.9%
7.9% EURO AREA SOUTH KOREA
FRANCE 8.9% 6.3% Nov ’21
6%

US 6.8% TURKIYE
4.1%
3.7%
9.0% 79.6% CHINA JAPAN 4%

ITALY 2.4% 2.3% 2.7%

MEXICO
8.4% 2%

8.0% INDIA Jan ’22 2.1%

SAUDI ARABIA 7.0% 0%
2.3% 2019 ‘20 ‘21 ‘22 2023
INDONESIA
BRAZIL 5.0%
11.9% Higher interest rates, slowing growth and continuing
Mar ’22 Russia-Ukraine crisis will hit some segments harder
SOUTH AFRICA AUSTRALIA
ARGENTINA
7.4% 5.4%
63.9% Consumer-related Cyclical
asset classes industries

Magnitude of inflation increase May ’22

Frontier market Low speculative-

5% 10% 20%+ sovereigns grade corporates

1 Inflation as of July 2022 for Australia, euro area, France, Germany, Indonesia, Italy, South Korea and Turkiye; data for rest of G-20 as of June 2022.
Jul ’22
Energy-intensive CIS and Baltic
EMEA industries banking systems
-0.6 -0.2 0 0.2 0.6 1
2 Moody’s Financial Conditions Indicators combine 13-18 financial
variables to offer a composite picture of financial conditions.
 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 https://ratings.moodys.com for
the most updated credit rating action information and rating history.

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ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE
REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN
Non-Financial Corporates: Rating Activity During COVID-19
The spread of the coronavirus has placed significant stress on the global economy, but corporate
Top 10 sectors most affected by COVID-19*
SECTOR % DOWNGRADED WITHIN SECTOR
Mar 1 – Nov 30, 2020
PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
downgrades reveal a thorough and measured approach to credit during turbulent times. Hotel, Gaming & Leisure 65

Then & Now: the number of speculative grade corporate Majority of downgrades within speculative grade*
MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY
Advertising, Printing & Publishing 56

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
issuers pre-COVID-19 was significantly higher versus Total # of downgrades per category, Mar 1 – Nov 30, 2020
pre-2008 credit crisis Transportation: Consumer 54
942
PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
Speculative Grade
Q4 2007 Q4 2019 Automotive 44
Proportion of publicly Proportion of publicly 583
rated issuers by category rated issuers
ers by category
r
ry Energy:
Energ
rgy
rg
gy: Oil & Gas 40
66% B

increase in 2019 121

speculative grade Investment Grade Consumer goods: Durable 35
To learn more, read the report
rated issuer count 176 For more information, visit moodys.com

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all
54% 46% 63% 37%
178
vs. 2007 Retail 35
Ba Caa
91
Services: Consumer 34
Auto1 sector performance will shape global growth US mass transit: ridership faces a long, slow recovery
Speculative Grade

information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and
27 Baa
Investment Grade 2 5 A
88% increase in Media: Diversified & Production 32

due to high interconnectedness

Aaa Aa Ca
B-rated issuers vvs. 2007

from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or
Aerospace & Defense 31 The coronavirus pandemic will continue to hurt mass transit systems’ financial performance across the United States. Ridership will grow in 2021... Key revenues
Recent downgrades represent a small percentage of the total non-financial corporates rated universe* Lockdowns, unemployment, remotetoworking,
Auto sales unlikely office closures
reach pre-crisis and slowdowns
level before in the retail and leisure industries have led to
mid-2020s
Fundamental auto trends, including stricter emissions regulation, autonomous driving
Calculation reflects percentage of corporate families with at least one downgrade since March 1. Some corporate families include multiple
issuers and some issuers have received multiple downgrades. Percentages reflect current number of issuers in each sector; ratings withdrawn Year-over-year
Mar 1 – Nov 30, 2020 large drops in ridership, which will not approach pre-pandemic levels for many years. % change

validate information received in the rating process or in preparing its Publications.

since 1 March 2020 are excluded.
andareconnectivity,
“Fallen Angels” entities that move from lead to increasing number of touchpoints with other industries.

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
FALLEN ANGELS IN DETAIL
T
TAIL investment grade to speculative grade 2019
ZF Friedrichshafen AG Late cycle reports highlighted corporate credit stress prior to COVID-19 Fares Taxes Federal aid
Ridership rebounding slower than jobs; multiple factors impeding return to normal service
-2.7% 0% 9.9 billion
Total downgrades -20%
30% 21% 16%
0.9%
1,063
25 Increase in B3s 09 As low-rated spec-grade 29 Loan and bond
MAY heightens market's SEP universe expands, more OCT convergence: investors -30% 20%
2019 vulnerability to a 2019 rated companies will 2019 pave way for lower -1.2% 17.5%R R Ridership % recovered
~30% of total Metals & Mining new default cycle likelyUtility
default or& be recoveries in -25% R -1.4% Down 53% Down 5.7% $25B one-time
-8.2% 2020
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special,
corporate rated *
universe
Rising number of Infrastructure
downgraded in the next downturn 16.2% R 24% -15% J Jobs % recovered in 2020 2020 stimulus
batteries in AFVs
Limitedwill Automakers & Part Suppliers VIEW REPORT next downturn R 18% -10%
7% -52%
Systems
drive demand for cobalt, AFV growth will drive VIEW REPORT
17% -11.8% R 2.5% 4.7 billion
Speculative Investment Fallen AMER
Carnival C
Corporation
orporat
APAC nickel and copper EMEA $337 BN demand for power
VIEW REPORT
and capex 30% R -30%
31%
consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any
Grade: Grade: Angels:
Assets Management Co., Ltd.
32% 20% Top ten issuers by ridership numbers
942 86 35 $209 BN $1,587 BN
Rated debt outstanding
Company Limited -4.4%
Rated debt outstanding -35% NY MTA 2021 *
38% 11% 05 Current weak credit 09 Global CLOs – in a severe 13 The top 10 ways
R 15%

of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or
of total SG of total IG
Apache Corporation SEP quality could fuel Caa SEP downturn scenario, credit NOV loan investors are Chicago Transit Authority 28% 6.0 billion
Gap, Inc. (The)
2019 issuers’ defaults in 2019 quality declines 2019 forfeiting protections
9%
rated population rated population
Macy's, Inc.
next downturn significantly, impairing
Los Angeles County MTA Transit riders being
Michael Kors (USA), Inc. Subway riders moving CITY
VIEW REPORT
junior tranches VIEW REPORT
R WMATA to suburbs and locked in due to low

prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
2019 actual Base case 2020 Base case 2021 MBTA becoming rail riders income and lack of
Exhibit does not include DIC Corporation
rporation (APAC)
( PAC) or
(A o Wirecard (EMEA) because these ratings have been withdrawn.
VIEW REPORT
15% J 2022* alternate transport
R R SEPTA
About 1% of companies across all rating categories were under review for downgrade at the end of November, about
37% Japan San Francisco MTA
23% 7.4 billion
the same at 1% at the end of October and 8% at the end of April. An additional 3
30% had negative outlooks.
10%
*Includes all publicly-rated nonfinancial corporate entities; excludes subsidiaries and project US W. Europe
finance-related corporations E. Europe Argentina/Brazil India China
7%
17,100 K 16,309 K 4,115 K 3,105 K 3,528 K 25,769 K 5,129 KBART
J K 4,360 KMARTA
Oil & Gas J12,825 K 11,410 K 3,292 K 2,018 K 2,470 23,200 K
14,900 K 13,406 K 3,951 K 2,321 K 2,964 K
53% 23,780 K 4,665 KDenver RTD 2023*
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to
AFV growth will slow 34% J Long-term migration and
Media & Telco demand for diesel
Number and growth rates represent Moody’s forecast for Light Vehicle Registrations.
20% 8.9 billion usage trends that could
Connectivity will drive and gasoline 30%
Impeding factors SUBURBS reshape mass transit Traffic congestion
demand for bandwidth, Auto sector has significant impact on global economy
offsetting 5G investment

$1,300 BN
Technology
Rising use of digital
$1,434 BN
Rated debt outstanding
Global exports totaled $1.3 billion Public health concerns

Slow job recovery in key sectors

Aggregate US transit ridership

* = Projected
will push people
back onto mass
transit
any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the
part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the
Rated debt outstanding systems will spur demand
for chips and software
Temporary and permanent remote work
WorkforceJ% J Manufacturing % Exports % ...but large costs will contribute to Suburban riders Increased car usage
$977 BN
slow return to financial stability moving further out in certain cities

information contained herein or the use of or inability to use any such information.
J Remote schools and universities
Rated debt outstanding
3.8%J 6.1% 43%8.3% 30%
17.7% 14% 21.6% 9.4% 12.6% 22% and become 2x per
US 52% EU Japan J US EU J Japan 44%
US EU Japan Access to alternate transportation Salaries & benefits week rail riders
Younger riders return
60% 44% Potential transit capacity limits COUNTRY to cities for reduced
Fixed costs (pensions, etc)
rent, social / work
Potential service cuts System operations opportunities

Recovery is calculated as the number of jobs/riders added since

the trough in April through September as a percentage of the
number of jobs/riders lost from January to April.
Facility maintenance
Capital projects
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