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Rating Action:

Moody's affirms four classes, places three classes on review for downgrade and downgrades five classes in COMM 2012-CCRE3; ratings remain on review

29 Jun 2020

Approximately $931 million of structured securities affected

New York, June 29, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on four classes, placed three classes on review for downgrade and downgraded the ratings on five classes that remain on review for downgrade in COMM 2012-CCRE3 Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2012-CCRE3 as follows:

Cl. A-3, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf)

Cl. A-M, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf)

Cl. A-SB, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf)

Cl. B, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Jul 19, 2018 Affirmed Aa3 (sf)

Cl. C, A3 (sf) Placed Under Review for Possible Downgrade; previously on Jul 19, 2018 Affirmed A3 (sf)

Cl. D, Downgraded to Baa3 (sf) and Remains On Review for Possible Downgrade; previously on Apr 17, 2020 Baa1 (sf) Placed Under Review for Possible Downgrade

Cl. E, Downgraded to B1 (sf) and Remains On Review for Possible Downgrade; previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade

Cl. F, Downgraded to B3 (sf) and Remains On Review for Possible Downgrade; previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade

Cl. G, Downgraded to Caa3 (sf) and Remains On Review for Possible Downgrade; previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade

Cl. X-A*, Affirmed Aaa (sf); previously on Jul 19, 2018 Affirmed Aaa (sf)

Cl. X-B*, Downgraded to Caa1 (sf) and Remains On Review for Possible Downgrade; previously on Apr 17, 2020 Ba3 (sf) Placed Under Review for Possible Downgrade

Cl. PEZ**, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Jul 19, 2018 Affirmed Aa3 (sf)

* Reflects interest-only classes

** Reflects exchangeable classes

RATINGS RATIONALE

The ratings on three P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges.

The ratings on four P&I classes were downgraded due to higher anticipated losses driven primarily by the decline in performance and significant exposure to three regional malls, Solano Mall (11% of the pool), Crossgate Mall (10% of the pool) and Emerald Square Mall (7% of the pool). Furthermore, the three regional mall loans, representing 27% of the pool, are scheduled to mature within the next two years and may face significant refinance risk due to the current retail environment.

The ratings on Cl. B and Cl C. was placed on review for possible downgrade, and the ratings on four P&I classes, Class D, Class E, Class F and Class G, remain on review for possible downgrade due to the significant exposure and uncertainty around the future performance of the two regional malls loans recently transferred to special servicing as a result of the coronavirus pandemic, Solano Mall and Crossgates Mall, both of which are more than 60 days delinquent on their debt service payments.

The rating on one IO class, Cl. X-B, was downgraded and remains on review for possible downgrade due to a decline in the credit quality of the referenced exchangeable classes and those referenced P&I classes were placed on review for possible downgrade.

The ratings on IO Class X-A was affirmed based on the credit quality of the referenced classes.

The rating on the exchangeable class, Class PEZ, was placed on review for possible downgrade due to its referenced P&I classes being placed on review for possible downgrade.

Our analysis has considered the effect of the coronavirus outbreak on the US economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the performance of commercial real estate. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.

The contraction in economic activity in the second quarter will be severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to our forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

Moody's rating action reflects a base expected loss of 9.6% of the current pooled balance, compared to 2.5% at Moody's last review. Moody's base expected loss plus realized losses is now 7.5% of the original pooled balance, compared to 2.0% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in rating all classes except exchangeable classes and interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187 and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875. The principal methodology used in rating the exchangeable classes was "Moody's Approach to Rating Repackaged Securities" methodology published in June 2020 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Repackaged-Securities--PBS_1230078. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187, "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875, and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Structured-Finance-Interest-Only-IO-Securities--PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *) and exchangeable classes (indicated by the **). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

DEAL PERFORMANCE

As of the June 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 22% to $973 million from $1.25 billion at securitization. The certificates are collateralized by 40 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans (excluding defeasance) constituting 70% of the pool. Eleven loans, constituting 15% of the pool, have defeased and are secured by US government securities.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 12, compared to a Herf of 15 at Moody's last review.

As of the June 2020 remittance report, loans representing 62% were current on their debt service payments, 7% were beyond their grace period but less than 30 days late, 10% were between 30 -- 59 days delinquent and 21% were between 60 -- 89 days delinquent.

Eight loans, constituting 17% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Five loans, constituting 21% of the pool, are currently in special servicing. Three of the specially serviced loans, representing 21% of the pool, have transferred to special servicing since March 2020.

The largest specially serviced loan is the Solano Mall Loan ($105.0 million -- 10.8% of the pool), which is secured by a 561,000 square feet (SF) portion of 1.1 million SF super regional mall located in Fairfield, California. The mall's non-collateral anchors include Macy's, J.C. Penney, and Sears, however, Sears previously announced plans to close its store in July 2020. The largest collateral tenant is Edwards Cinemas (11.2% of NRA, lease expiration December 2024). Property performance has continued to decline from securitization and the property's 2019 net operating income (NOI) was 27% lower than securitization levels due to both lower total revenues and increased operating expenses. Furthermore, several major collateral tenants including Forever 21 (13% of NRA), 24 Hour Fitness (5% of NRA) and Express (1% of NRA) have announced plans to close their locations at the mall. The property was 94% leased as of December 2019, compared to 98% leased as of December 2017, however, the 2019 occupancy includes the tenants with plans to vacate. The loan is interest only for its entire term and matures in July 2022. The mall re-opened in late May after its temporary closure, however, the loan transferred to special servicing in June 2020 for imminent default as a result of the coronavirus pandemic and is last paid through its March 2020 payment date.

The second largest specially serviced loan is the Crossgates Mall Loans A-1A2 and A-1B2 ($94.2 million -- 9.7% of the pool) which represents a pari-passu portion of a $261.7 million mortgage loan. The loan is secured by a two-story, 1.3 million square foot (SF) super regional mall located in Albany, New York. The mall is anchored by Macy's (non-collateral), J.C. Penney, Dick's Sporting Goods, Burlington Coat Factory, Best Buy and Regal Crossgates 18. As of March 2020, the total mall and collateral occupancy was 96% and the in-line occupancy was 89%, compared to 88% in March 2019. The property performance has been stable and the 2019 net operating income was 2% higher than securitization levels. The loan was transferred to special servicing in May 2020 as a result of the coronavirus outbreak and is last paid through its March 2020 payment date. New York suspension of non-essential business closures attributed to the mall remaining closed, with certain tenants offering curbside pick-up in the exterior of the mall. As a result of the closure, many tenants have not remitted rent payments in recent months. The special servicer indicated they are in discussions with the borrower to formulate a resolution plan. The mall represents a dominant super-regional mall with over 10 anchors and junior anchors and benefits from its location at the junction of Interstate 87 and Interstate 90. However, due to reopening uncertainty and delinquent debt service payments, Moody's identified this as a troubled loan.

The remaining two specially serviced loans are secured by limited service hotel properties in Georgia and in South Carolina that transferred to special servicing in April 2019 and November 2019, respectively, due to declining performance from securitization.

Moody's has also assumed a high default probability for two poorly performing loans, constituting 11.5% of the pool. The largest troubled loan is the Emerald Square Mall Loan, which is secured by a 564,501 SF portion of a 1,022,923 SF enclosed super-regional mall in North Attleboro, Massachusetts. The mall is anchored by a Macy's, Macy's Home, Sears and J.C. Penney, of which only J.C. Penney is collateral for the loan. While all anchors remain at the property, property performance has declined since securitization due to lower rental revenues. The reported 2019 revenues were $5 million lower than in 2012, leading to a decline in NOI of 26% for the same period. As of December 2019, the property was 80% leased, compared to 83% as of March 2018 and 90% at securitization. The mall re-opened on June 10 after closing temporarily during the pandemic. The loan sponsor, Simon Property Group, recently classified this mall under their "Other Properties." The loan has amortized nearly 14% since securitization, however, the loan is on the master servicer watchlist due its late payments and is last paid through its April 2020 payment date.

The other troubled loan is secured by two properties of mixed use located in Washington, DC. The properties performance has declined due to the recent departure of a large tenant at one of the properties and the 2019 actual DSCR was below 1.00X.

Moody's received full year 2018 and 2019 operating results for 99% and 96% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 99%, compared to 88% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 23% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.6%.

Moody's actual and stressed conduit DSCRs are 1.64X and 1.13X, respectively, compared to 1.89X and 1.29X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top three conduit loans represent 28% of the pool balance. The largest loan is the 260 and 261 Madison Avenue Loan ($126.0 million -- 12.9% of the pool), which is secured by two Class-B office towers located in midtown Manhattan on Madison Avenue between East 36th and East 37th Street. The properties total approximately 840,000 SF of office space, 37,000 SF of retail space, and a 46,000 SF parking garage. This loan represents a pari-passu portion of a $231.0 million first mortgage. As of December 2019, the properties had a combined occupancy of 90.5%, compared to 87% as of December 2018 and 90% at securitization. The property faces upcoming lease roll of 19% in 2021, which includes the largest tenant, McLaughlin & Stern LLP (12.5% of net rentable area; 115,500 SF). The property's NOI has declined in recent years due to increases in operating expenses. The loan is interest only throughout its entire term and Moody's LTV and stressed DSCR are 120% and 0.81X, respectively, compared to 97% and 0.98X at the last review.

The second largest loan is the Prince Building Loan ($75.0 million -- 7.7% of the pool), which is secured by a pari passu portion of a $200.0 million first-mortgage loan. The loan is secured by the fee interest in a 12-story retail and office building, totaling 355,000 SF and located in the SoHo neighborhood of Manhattan. The property contains 69,346 SF of retail space and 285,257 SF of office space. The property was built in 1897 and was acquired by the sponsor in 2003. The property's NOI has generally declined since securitization due to slightly lower rental revenues and significant increase in operating expenses. The property has benefited from recent leasing and was 94% leased as of March 2020 compared to 91% at year-end 2019. Major office tenants at the property include Group Nine Media, Inc. Zoc Doc and Equinox. The loan is interest only throughout its entire term and Moody's LTV and stressed DSCR are 116% and 0.81X, respectively, compared to 87% and 1.09X at the last review.

The third largest loan is the Midland Park Mall Loan ($72.8 million -- 7.5% of the pool), which is secured by a 277,659 SF portion of a 629,405 SF regional mall located in Midland, Texas. The property's non-collateral anchors are Dillard's and J.C. Penney. The property also includes one vacant, former Sears, non-collateral anchor box. The property is the dominant regional mall in the Midland-Odessa metropolitan area and performance has continually improved since securitization The 2019 NOI was up over 50% from 2012 as a result of significant increases in rental revenue. The collateral was 93% leased as of December 2019, compared to 97% leased as of March 2018. The loan sponsor is Simon Property Group and the loan remains current through its June 2020 payment date. The loan has amortized 14% since securitization and Moody's LTV and stressed DSCR are 74% and 1.46X, respectively, compared to 63% and 1.55X at the last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Christopher Bergman
Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Matthew Halpern
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 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.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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