CORPORATESISSUER COMMENT 20 JULY 2015INTERNATIONAL PAPER COMPANY (IP)Moodys Senior Unsecured Rating Baa2Moodys Outlook RU STABond-Implied Rating Baa1CDS-Implied Rating Baa1EDF-Implied Rating A2As of 7/15/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewInternational Paper Co.: Market-Implied Ratings Follow Different Paths Recently Over the last 90 days the market-implied ratings for International Paper took different routes.The companys bond-implied rating fluctuated several times between a low Baa3 and a high Baa1. It presently stands at Baa1, beating its Baa2 level of 90 days ago (Figure 1).The CDS-implied rating was less volatile and rose by one notch from the Baa2 of three months ago, reaching the Baa1 level.The EDF'-implied rating worsened by two notches and declined from Aa3 on April 15, 2015 to A2 at present.FIGURE 1. INTERNATIONAL PAPER: MOODYS AND MARKET-IMPLIED RATINGS, LAST 90 DAYS (DAILY DATA)MOODY'S ANALYTICS CORPORATES2 20 JULY 2015 MARKET SIGNALS REVIEW : INTERNATIONAL PAPER CO.: MARKET-IMPLIED RATINGS FOLLOW DIFFERENT PATHS RECENTLYAccording to our ratings gap-conditioned transition matrices, companies rated Baa2 with a bond-implied rating of Baa1 outperformed the broad market 37% of the time over the following 12 months, matched the markets performance 16% of the time, and underperformed the broad market 48% of the time.As shown in Figure 2, the bond-implied ratings gap was zero notches 90 days ago. On multiple dates it fell to -1 notch but has recovered to +1 notch at present. Over the same period. the CDS-implied ratings gap shifted up from zero notches to the +1 notch level. The EDF-implied ratings gap deteriorated from +5 notches to +3 notches .Readers will recall that whe...
