- Oops!Something went wrong.Please try again later.
Rating Action: Moody's assigns definitive ratings to Progress Residential 2021-SFR2 TrustGlobal Credit Research - 08 Apr 2021New York, April 08, 2021 -- Moody's Investors Service, ("Moody's") has assigned definitive ratings to four classes of certificates backed by one fixed-rate loan secured by mortgages on 5,421 single-family rental properties owned by Progress Residential (Progress) 2021-SFR2 Trust securitization.The complete rating action is as follows:Issuer: Progress Residential 2021-SFR2 TrustCl. A, Definitive Rating Assigned Aaa (sf)Cl. B, Definitive Rating Assigned Aa3 (sf)Cl. C, Definitive Rating Assigned A3 (sf)Cl. D, Definitive Rating Assigned Baa3 (sf)RATINGS RATIONALEOverviewThe transaction's Aaa advance rate (the ratio of senior certificate to the Moody's Value) is 43.04%. Moody's uses the advance rate to determine whether the asset value is sufficient to support a targeted rating level given the size of the transaction's liabilities.The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of single family rental sector from a gradual and unbalanced recovery in US economic activity. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Key Transaction FeaturesEnhanced structural features: The transaction structure has a multi-tier DSCR test and a payment-in-kind (PIK) feature for class F to H. Similar to Progress 2021-SFR1 transaction, the PIKable certificates can receive partial interest payment even before the multi-tier DSCR test kicks in. In our opinion, this structure is slightly credit negative because in several scenarios, available funds in the cash collateral can be lower than prior transactions. In an event of default, funds in this account can act as additional credit enhancement to the certificates. Our advance rates reflect a small adjustment for this feature.Increased Leverage: The total leverage (excluding Class I) of 87.5% in Progress 2021-SFR2 is the same as in Progress 2021-SFR1. The sponsor will retain Class I, which is about 7.50% of total BPO value, for the term of the transaction.Delinquent tenants: As of December 31, 2020, there are 508 tenants who have been delinquent for 30 days or more, representing approximately 9.4% of the total property count, which is substantially higher than most Progress transactions of approximately 1-2% but is similar to the delinquency rate of 12.9% in Progress 2021-SFR1 transaction. However, total delinquent amount is approximately $1,124,577, representing approximately 1.20% of total annual gross revenue. For tenants who are affected by COVID-19, Havenbrook Manager does not offer rent forgiveness but in some cases would waive late charges, accept partial payments and offer rental repayment plans. As of February 28, 2021, 209 tenants are still delinquent. Overall, HavenBrook has maintained strong rent collections on the 2021-SFR2 pool with over 90% rental collection rate.Payment Priority: On each monthly payment date, except during a loan event of default, funds in the cash management account will be applied sequentially to the security deposit account, tax account, and insurance account as necessary in order to make required payments, then to the lender, funds sufficient to pay the monthly debt service coverage which will be used to pay interest due on class A through class E sequentially, and, if funds are available, to pay the class F up to the lesser of its coupon and .5%, to pay the class G up to the lesser of its coupon and 4.5%, to pay the class H up to the lesser of its coupon and 4.5%, and then if the DSCR for the non-PIK bonds is at least 1.20x, to pay remaining interest due on class F (if any), and if the DSCR for classes A through F is at least 1.20x, to pay remaining interest due on class G, and if the DSCR for classes A through G is at least 1.20x, to pay remaining interest due on class H.The interest otherwise due on the PIK bonds will be subordinated to mandatory principal repayment of the loan, property management fees, and the capital expenditure reserve account. Any remaining cash will be trapped in the cash collateral account. Failure to pay current interest to the class F, G and H will not result in an event of default, but the interest due will accrue to the balance of these bonds. Once the DSCR ratio for class A through class E-2 is above 1.20x for two consecutive quarters, the funds in the cash collateral account will first be used to reduce the balance of the PIK bonds by the amount of their respective deferred interest amounts in sequential order.Voluntary prepayments from unrestricted cash not associated with a release of collateral would be distributed in reverse sequential order. This benefits the trust not only because the securitized loan balance would decrease while the collateral balance would remain unchanged, but the reverse sequential payment would also improve the transaction debt service coverage ratio as weighted average spread on the loan decreases. Overall, we are credit neutral on this particular feature as the cash flow is from the sponsor and not from the trust, and is an option that the sponsor can exercise. Of note, voluntary prepayments to cure low DSCR trigger still remain sequential.This deal has a three-year yield maintenance premium that requires the borrowers to pay a yield maintenance amount following the voluntary release of the property. With respect to 7.5% of optional release properties, the sponsor may release these properties at any time and will not be subjected to the payment of yield maintenance premium. We are credit neutral on this feature since the yield maintenance premium amount is not used to pay down the notes and we do not rate to this amount. In addition, this deal is a non-amortizing deal. The cash from the property release payments will benefit the trust since proceeds from the sale up to the allocated loan amount plus the premium release amount would be available to repay the notes. Since the optional release properties are not subject to yield maintenance premium, the borrowers may be more inclined to release the property since it is cost effective for the borrowers.The securitization incorporates up to 5% voluntary substitution (by property count) over the life of the transaction. Similar to Progress 2020-SFR3 transaction, the total property substitution can be increased up to a maximum of 35% subject to certain conditions. Any substitution over 5% is subject to receipt of a no downgrade confirmation (a rating agency condition, or RAC (See our 2010 Special Comment, "Moody's Clarifies Policy for the Issuance of RACs" which makes clear that the provision of a RAC remains entirely within Moody's discretion, and it may be that Moody's will not provide a RAC even if the transaction documents - to which we are not a party - require it.). At the time of a RAC request, we would likely consider, among other things, the credit profile of the updated pool, including geographic concentrations, and third party reviews of the substitute properties.Similar to Progress 2021-SFR1, this deal will also include an Excess Collateral Release (ECR) feature whereby the sponsor can remove properties without prepaying the loan balance, or paying yield maintenance or a release premium to the trust. The ECR will be subject to rating agency confirmation, or RAC, that the ratings will not be withdrawn or downgraded as a result of the exercise of such feature. The ECR will also have to satisfy certain LTV ratio requirement as well as geographic diversity and rents and cash flow tests.Approximately, 26.4% of the properties by count in the pool are located in Texas. Properties in Texas had wide spread power outages and damage to power and water infrastructure due to a series of winter storms in February 2021. The sponsor is not aware of any property with damages exceeding $15,000 due to such winter storm and none of the properties were deemed inhabitable. All such properties will be covered by comprehensive all risk insurance. In addition, the trust will also benefit from no damage representation and warranty from the borrowers.Recovery analysisThe Final Recovery Value, which varies by rating levels, is calculated through the following steps.1. For all properties in the pool, we estimated Moody's Value by applying a haircut to the recent BPO values instead of using the lower of haircutted BPOs and cost basis to estimate Moody's value. We applied this approach because as properties age, original purchase price and renovation costs become less relevant whereas current property values become more important.We estimate the Moody's Value to be $835 million.2. Moody's assumed that a lower percentage of these properties will be sold out of the transaction at full market value before a borrower defaults, netting proceeds equal to the allocated loan amounts plus a pre-determined premium on those properties.3. To account for potential adverse selection and increased geographic concentration in certain markets, in the disposition of the properties remaining in the pool after a default, Moody's applied a home price depreciation factor to the properties' values ranging from 30% to 50% of the Moody's Values at a Aaa level, depending on the MSA. Our home price depreciation assumptions are informed by, among other things, a review of the housing markets in the key MSAs and geographic concentration as measured by the effective number of MSAs.4. Under its Aaa stress scenario, Moody's assumed that the total cost required to maintain all the properties remaining in the pool after default, including real estate taxes, property management fees, vacancy, home owners association fees, insurance, repairs, and sales and marketing, would stretch for 35 months while a portion of the properties would generate income for 25 months. Moody's stress for foreclosure timeline for this transaction is lower than a typical RMBS transaction because Moody's expects the foreclosure process to be quicker since the trust does not have to foreclose on individual borrowers; instead, it will foreclose either on the special purpose vehicle borrower itself or the properties owned by a single entity.5. Moody's estimated foreclosure costs that included fixed legal costs, special servicing fees of 0.25% of the loan amount; special servicing liquidation fees of 0.75% of the property value; and transfer taxes.6. Finally, Moody's assumed that the master servicer will continue to advance the interest (to the extent deemed recoverable) on the certificates until the properties are liquidated, and estimated the interest accrued on the servicer advances.In addition, the loan agreement specifies minimum tenant eligibility criteria and lease requirements. We view the tenant eligibility criteria in the loan agreement as weak because there is no income-to-rent coverage criteria. We took this into consideration in our analysis and applied a negative adjustment to our recoveries.Progress Residential, LLC (Progress Manager) will be the property manager for this transaction. Progress Manager has sub-contracted day-to-day management and operation to HavenBrook Homes, LLC (HavenBrook Manager), a Delaware limited liability company, formed in March 2016. Properties in the securitized pool will be 100% managed by HavenBrook Manager, who will be responsible for all aspects of operations: renovations, repairs, leasing, marketing, tenant screening, tenant services, compliance, safety and general preservation of the collateral. We believe the combination of internal Pretium Residential central property management oversight functions coupled with local expertise of HavenBrook Manager is effective in handling the day-to-day business of managing a national single-family rental platform, including overseeing third-party local contractors due to strong oversight, controls, and review. We also believe that it has adequate technological systems that allow it to efficiently manage employees to control labor costs, track and monitor repairs and maintenance, and most importantly, to attract, respond to, and retain tenants.Master and special servicerA highly rated master servicer, Midland Loan Services, a division of PNC Bank, National Association (long-term senior unsecured A2 negative, long-term bank deposits Aa2 negative, bca a2) is responsible for advancing timely payments of interest on the loan to the extent deemed recoverable. The servicer will also receive monthly updates on the status of every property backing the transaction. Having a special servicer that can step in to manage the portfolio to maximize recoveries for the certificate holders in the event of a borrower default is credit positive.Of note, the master servicer will only be advancing interest payments to class A through class E-2 and not class F, G and H. In addition, servicing fees will be calculated based on outstanding principal balance minus any deferred interest.Midland Loan Services will also be the special servicer for this transaction and will be responsible for servicing and administering the loan in the event of default or in the case of a reasonably foreseeable default that could give rise to the transfer of servicing to the special servicer and of any foreclosed collateral. Midland is an integral part of PNC's real estate finance business, and has more than 20 years of experience as a commercial mortgage master, and primary and special servicer for CMBS securitizations, government sponsored enterprises and institutional investors. Although we deem the servicing arrangement to be adequate, we applied a negative adjustment to our recoveries to account for the concentration risk of having a limited number of available servicers in SFR securitizations.Cash flow analysisMoody's weighted average adjustment to the pool's underwritten net cash flow was -25.9%. The Moody's debt service coverage ratio is 1.9x for class A through class H. For more details on Moody's CMBS approach to analyzing rental cash flows, refer to "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS."Factors that would lead to an upgrade or downgrade of the ratings:UPMoody's would consider upgrading the transaction or some of its tranches if, for example, properties underlying the portfolio were to appreciate substantially and the property conditions were to remain well maintained.DOWNMoody's would consider downgrading the transaction if the transaction were to breach its DSCR trigger. Additionally, breaches of certain loan covenants could lead to an event of default in the transaction and, if unremedied, a downgrade. Moody's will also monitor the transaction's portfolio mix for any unexpected changes. Unexpected negative changes could result from unusual patterns in the properties that are released by a sponsor as contemplated by the transaction documents. Also, where available, changes in rent renewal and lease turnover rates and time to re-rent could indicate performance issues.The principal methodology used in these ratings was "Single-Family Rental Securitizations Methodology" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1214103. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor 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.Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1276367 .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.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows.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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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. Pavan Prema Kumar 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 Sonny Weng Vice President - Senior Analyst 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 © 2021 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 CREDIT RATINGS AFFILIATES ARE THEIR 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 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 APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S 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.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.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 PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.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 PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.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 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 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 validate information received in the rating process or in preparing its Publications.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, 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 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 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.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 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 information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.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 $5,000,000. 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 JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.