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Rating Action:

Moody's downgrades Toyota, Honda, Nissan and Yamaha; places all ratings on review for downgrade

 The document has been translated in other languages

26 Mar 2020

Tokyo, March 26, 2020 -- Moody's Japan K.K. has downgraded to A1 from Aa3 the long-term ratings of Toyota Motor Corporation (Toyota) and its captive finance subsidiaries. The ratings have also been placed on review for further downgrade. Prime-1 commercial paper ratings of Toyota and its captive finance subsidiaries are also placed on review for downgrade.

At the same time, Moody's has placed (P)A1 global scale rating of Toyota Financial Services (South Africa) Ltd. on review for downgrade.

Also, Moody's has downgraded to A3 from A2 the long-term ratings of Honda Motor Co., Ltd. (Honda) and its captive finance subsidiaries. Moody's has also downgraded Honda and its captive finance subsidiaries' commercial paper ratings to Prime-2 from Prime-1. The ratings have also been placed on review for further downgrade.

Further, Moody's has downgraded to Baa3 from Baa1 the long-term ratings of Nissan Motor Co., Ltd. (Nissan). The ratings have also been placed on review for further downgrade.

Lastly, Moody's has downgraded Yamaha Motor Company Limited's (Yamaha) issuer rating to Baa1 from A3. The rating has also been placed on review for further downgrade.

Toyota, Honda and Nissan's outlooks have changed to under review from negative. Yamaha's outlook has changed to under review from stable.

A full list of the affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The automotive sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment.

More specifically, weaknesses in the Japanese automotive and motorcycle manufacturers' credit profiles, including their exposure to pronounced cyclical downturns and changing consumer demand, have left them vulnerable to shifts in market sentiment in these unprecedented operating conditions, and the companies remain vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Today's actions reflect the impact on the Japanese automotive and motorcycle manufacturers of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered.

The one-notch downgrade of Toyota's long-term ratings takes into consideration the demand volatility that the company is currently facing and its limited resilience to economic cycles, which restrain its ratings from being above the sovereign rating of Japan (A1 stable), where its central operation resides. Relative to the other global automakers, Toyota has been recording high profitability with around 9% of EBITA margin and robust liquidity. Still, Moody's expects Toyota's unit sales to decline given the spread of the coronavirus, straining its future cash flow and profitability. Such volatility constrains the company's credit quality, despite its global presence and geographic diversification.

The one-notch downgrade of Honda's ratings reflects the company's already weak profitability in its core automotive business, which recorded less than 2% of operating margin in fiscal 2018 ended in March 2019, prior to the coronavirus outbreak. The company's motorcycle business, which recorded a high operating margin around 13% in fiscal 2018, provided support to overall profit and margins. However, given the motorcycle business' reliance on emerging markets, Honda's margins would deteriorate as the coronavirus outbreak spreads and weakens demand in the volatile emerging economies.

The two-notch downgrade of Nissan's ratings reflects the company's weak unit sales and profitability, as it attempts to refresh old models and rebuild its brand strength, which could be prolonged with the decline in global demand and plant operations. Nissan will likely record negative free cash flow in fiscal 2019 ending in March 2020. Moody's expects that Nissan can maintain sufficient near-term liquidity for its automotive segment, but a sustained negative free cash flow would erode its liquidity. Nissan also faces challenges from stabilizing its relationship with Renault S.A. (Ba1 review for downgrade) under the new management team.

The one-notch downgrade of Yamaha's rating reflects the significant volatility inherent in its major products, such as engines for sports and luxury boats and motorcycles in emerging markets, which are susceptible to economic downturns. The marine segment that manufactures boat engines contributed to over 50% of its consolidated operating profit in 2019. Emerging markets for motorcycle business comprised substantially all of Yamaha's land mobility segment's operating profits, which accounted for 36% of consolidated operating profit in 2019.

WHAT COULD CHANGE THE RATING UP/DOWN

Toyota

Given the current market situation, Moody's does not anticipate any short-term positive rating pressure. A stabilization of the market situation leading to a recovery in metrics to pre-outbreak levels could lead to positive rating pressure. More specifically, positive rating pressure would build if the automotive segment's EBITA margin improves beyond 10% and debt/EBITDA stays below 1.0x on a sustained basis, while maintaining its current level of net cash position.

Further negative pressure would build if Toyota fails to record meaningful operating profits towards the second half of 2020. A prolonged and deeper slump in demand than currently anticipated leading to higher demand in liquidity, a balance sheet deterioration and a longer path to restoring credit metrics in line with an A1 credit rating could also lead to further negative pressure on the rating.

Honda

Given the current market situation Moody's does not anticipate any short term positive rating pressure. A stabilization of the market situation leading to a recovery in metrics to pre-outbreak levels could lead to positive rating pressure. More specifically, positive rating pressure would build if Honda's overall credit metrics improve to levels comparable with those of its global peers, with maintaining its EBITA margin above 7% on a sustained basis.

Further negative pressure would build if Honda fails to record meaningful operating profits towards the second half of 2020. A prolonged and deeper slump in demand than currently anticipated leading to higher demand in liquidity, a more balance sheet deterioration and a longer path to restoring credit metrics in line with an A3 credit rating could also lead to further negative pressure on the rating.

Nissan

Given the current market situation Moody's does not anticipate any short term positive rating pressure. A stabilization of the market situation leading to a recovery in metrics to pre-outbreak levels could lead to positive rating pressure. More specifically, positive rating pressure would build if Nissan demonstrates a clear path towards achieving an EBITA margin above 5% and if it returns to positive free cash flow after dividend payments.

Further negative pressure would build if Nissan fails to record meaningful operating profit generation towards the second half of 2020. A prolonged and deeper slump in demand than currently anticipated leading to higher demand in liquidity, a more balance sheet deterioration and a longer path to restoring credit metrics in line with a Baa3 credit rating could also lead to further negative pressure on the rating.

Yamaha

Given the current market situation Moody's does not anticipate any short term positive rating pressure. A stabilization of the market situation leading to a recovery in metrics to pre-outbreak levels could lead to positive rating pressure. More specifically, positive rating pressure would build if Yamaha can sustain its profit such that its debt/EBITDA stays below 2.5x or its retained cash flow/debt stays above 25%, all including debt at its captive finance business.

Further negative pressure would build if Yamaha fails to record meaningful operating profit generation towards the second half of 2020. A prolonged and deeper slump in demand than currently anticipated leading to higher demand in liquidity, a more balance sheet deterioration and a longer path to restoring credit metrics in line with a Baa1 credit rating could also lead to further negative pressure on the rating.

Moody's review for downgrade of the Japanese automakers takes into account the fact that demand for new vehicles will decrease meaningfully over the coming months, especially in the EMEA and North American markets. This is likely to continue until at least the beginning of summer, with a reasonable recovery from low points commencing at that time. Moody's current assumptions are that global demand will shrink by about 14% for 2020, and could be down in the range of 30% for the second quarter.

Accelerating spread of the coronavirus across the US and EMEA could lead to even more extended production shutdowns and a much delayed recovery of unit sales for Japanese automakers. Production facilities in Europe and North America are mostly closed, as are factories along the broader auto supply chain. These closures should restrain inventories of unsold vehicles for the time being, but automakers would need to manage across its supply chain to avoid disruption in supplies as they restart new vehicle production.

Even without production for a few months, excess inventory could lead to automakers paying considerable incentives to clear out old models before shipping new models. For now, Moody's assumes demand recovering over the third quarter; however, the risk to the downside remains around the severity and duration of the pandemic.

In the Chinese market, Moody's expects auto sales to steadily improve from levels in the first quarter, but this market faces downside risks in terms of the pace and magnitude of demand recovery.

Moody's review for downgrade of Honda and Yamaha also takes into consideration the potential decline in demand for their motorcycle businesses in emerging markets, which could be more pronounced than their automotive businesses given the volatility in emerging economies. For Yamaha, the review for downgrade also reflects further demand pressure on its boat engine business that largely caters to luxury products.

Moody's review will focus on (1) the impact of the coronavirus outbreak on the manufacturing operations of the companies, including their supply chains; (2) the impact on demand in the companies' key global markets amid subdued consumer sentiment and governments' containment measures; (3) any government measures to support corporates and consumers in the companies' main markets, as well as the companies' own countermeasures; and (4) the companies' liquidity profiles.

The review will on the basis of these factors make an assessment around the companies' ability to restore their credit metrics to levels that support their current ratings and of the timing of such recovery.

Moody's expects to conclude the review within 90 days.

In addition to the disruption from the outbreak of the coronavirus, the auto industry also faces a number of longer-term challenges related to environmental, social and governance (ESG) factors and megatrends.

These include (1) increasing environmental standards, stricter emissions regulation and electrification, (2) autonomous driving and connectivity, (3) increasing vehicle safety regulations as well as (4) new market entrants.

Moody's expects automakers will need to make sizable investments over the coming years to weather these challenges, in turn constraining their ability to turn around profit and cash flow generation.

While Moody's believe the companies' roadmap to become compliant with stricter emissions regulation is largely achievable, compliance costs have also materially increased in some regions. In addition, the success of the roadmap will hinge to some degree on consumer acceptance and pricing policies of peers that are not in the control of individual automakers.

The principal methodology used in rating Toyota Motor Corporation, Honda Motor Co., Ltd., and Nissan Motor Co., Ltd. was Automobile Manufacturer Industry (Japanese) published in July 2017. The principal methodologies used in rating Toyota Motor Finance (Netherlands) B.V., Toyota (GB) PLC, and Yamaha Motor Company Limited were Automobile Manufacturer Industry (Japanese) published in July 2017, and Captive Finance Subsidiaries of Nonfinancial Corporations (Japanese) published in August 2019. The principal methodologies used in rating Toyota Financial Services (UK) PLC, Toyota Financial Services (South Africa) Ltd., Toyota Financial Services Corporation, Toyota Finance Australia Limited, Toyota Finance Corporation, Toyota Finance New Zealand Limited, Toyota Leasing GmbH, Toyota Kreditbank GmbH, Honda Finance Co., Ltd., Honda Finance Europe Plc, and Honda Bank GmbH were Captive Finance Subsidiaries of Nonfinancial Corporations (Japanese) published in August 2019, and Finance Companies Methodology (Japanese) published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Headquartered in Aichi, Japan, Toyota Motor Corporation is Japan's largest automaker by units sold.

Headquartered in Tokyo, Honda Motor Co., Ltd. (Honda) is a major Japanese automobile manufacturer as well as the world's largest manufacturer of motorcycles.

Headquartered in Yokohama, Nissan Motor Co., Ltd. is one of Japan's largest automobile manufacturers.

Headquartered in Shizuoka, Japan, Yamaha Motor Company Limited, is one of the leading motorcycle manufacturers in the world.

The local market analyst for Toyota Financial Services (South Africa) Ltd.'s ratings is Dion Bate, 9714-237-9504.

The following ratings are affected:

..Issuer: Toyota Motor Corporation (Lead Analyst: Motoki Yanase)

....Long-term Issuer Rating, Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Senior Unsecured Regular Bond/Debenture (Local and Foreign Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Senior Unsecured Shelf (Local and Foreign Currency), Downgraded to (P)A1 from (P)Aa3; Placed Under Review for further Downgrade

....Commercial Paper (Local Currency), Placed on Review for Downgrade, currently P-1

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Toyota Financial Services (UK) PLC (Lead Analyst: Motoki Yanase)

....Backed Commercial Paper (Foreign Currency), Placed on Review for Downgrade, currently P-1

..Issuer: Toyota Financial Services (South Africa) Ltd. (Lead Analyst: Motoki Yanase)

....Backed Senior Unsecured Medium-Term Note Program (Local Currency), Placed on Review for Downgrade, currently (P)A1

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Toyota Financial Services Corporation (Lead Analyst: Motoki Yanase)

....Backed Long-term Issuer Rating, Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Long-term Issuer Rating (Local Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Toyota Finance Australia Limited (Lead Analyst: Motoki Yanase)

....Backed Long-term Issuer Rating, Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Long-term Issuer Rating (Local Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Regular Bond/Debenture (Local and Foreign Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Medium-Term Note Program (Local and Foreign Currency), Downgraded to (P)A1 from (P)Aa3; Placed Under Review for further Downgrade

....Backed Commercial Paper (Local and Foreign Currency), Placed on Review for Downgrade, currently P-1

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Toyota Finance Corporation (Lead Analyst: Motoki Yanase)

....Backed Long-term Issuer Rating, Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Long-term Issuer Rating (Local Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Shelf (Local Currency), Downgraded to (P)A1 from (P)Aa3; Placed Under Review for further Downgrade

....Backed Commercial Paper (Local Currency), Placed on Review for Downgrade, currently P-1

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Toyota Finance New Zealand Limited (Lead Analyst: Motoki Yanase)

....Backed Long-term Issuer Rating, Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Long-term Issuer Rating (Local Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Medium-Term Note Program (Local Currency), Downgraded to (P)A1 from (P)Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Commercial Paper (Local Currency), Placed on Review for Downgrade, currently P-1

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Toyota Leasing GmbH (Lead Analyst: Motoki Yanase)

....Backed Commercial Paper (Local Currency), Placed on Review for Downgrade, currently P-1

..Issuer: Toyota Motor Finance (Netherlands) B.V. (Lead Analyst: Motoki Yanase)

....Backed Long-term Issuer Rating, Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Long-term Issuer Rating (Local Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Medium-Term Note Program (Foreign Currency), Downgraded to (P)A1 from (P)Aa3; Placed Under Review for further Downgrade

....Backed Senior Unsecured Regular Bond/Debenture (Local and Foreign Currency), Downgraded to A1 from Aa3; Placed Under Review for further Downgrade

....Backed Commercial Paper (Local and Foreign Currency), Placed on Review for Downgrade, currently P-1

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Toyota (GB) PLC (Lead Analyst: Motoki Yanase)

....Backed Commercial Paper (Local Currency), Placed on Review for Downgrade, currently P-1

..Issuer: Toyota Kreditbank GmbH (Lead Analyst: Motoki Yanase)

....Backed Commercial Paper (Local Currency), Placed on Review for Downgrade, currently P-1

..Issuer: Honda Motor Co., Ltd. (Lead Analyst: Masako Kuwahara)

....Long-term Issuer Rating, Downgraded to A3 from A2; Placed Under Review for further Downgrade

....Long-term Issuer Rating (Local Currency), Downgraded to A3 from A2; Placed Under Review for further Downgrade

....Commercial Paper (Local Currency), Downgraded to P-2 from P-1; Placed Under Review for further Downgrade

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Honda Bank GmbH (Lead Analyst: Masako Kuwahara)

....Backed Commercial Paper (Foreign Currency), Downgraded to P-2 from P-1; Placed Under Review for further Downgrade

..Issuer: Honda Finance Co., Ltd. (Lead Analyst: Masako Kuwahara)

....Backed Senior Unsecured Regular Bond/Debenture (Local Currency), Downgraded to A3 from A2; Placed Under Review for further Downgrade

....Backed Senior Unsecured Shelf (Local Currency), Downgraded to (P)A3 from (P)A2; Placed Under Review for further Downgrade

....Backed Commercial Paper (Local Currency), Downgraded to P-2 from P-1; Placed Under Review for further Downgrade

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Honda Finance Europe Plc (Lead Analyst: Masako Kuwahara)

....Backed Commercial Paper (Foreign Currency), Downgraded to P-2 from P-1; Placed Under Review for further Downgrade

..Issuer: Nissan Motor Co., Ltd. (Lead Analyst: Motoki Yanase)

....Long-term Issuer Rating (Local Currency), Downgraded to Baa3 from Baa1; Placed Under Review for further Downgrade

....Senior Unsecured Regular Bond/Debenture (Foreign Currency), Downgraded to Baa3 from Baa1; Placed Under Review for further Downgrade

....Outlook, Changed To Rating Under Review From Negative

..Issuer: Yamaha Motor Company Limited (Lead Analyst: Masako Kuwahara)

....Long-term Issuer Rating, Downgraded to Baa1 from A3; Placed on Review for further Downgrade

....Outlook, Changed To Rating Under Review From Stable

REGULATORY DISCLOSURES

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.

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

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

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.

Motoki Yanase
VP - Senior Credit Officer
Corporate Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Mihoko Manabe
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

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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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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