CORPORATESISSUER COMMENT 19 NOVEMBER 2015MCDONALDS CORP. (MCD)Moodys Senior Unsecured Rating Baa1Moodys Outlook STABond-Implied Rating A3CDS-Implied Rating A2EDF-Implied Rating Aa2As of 11/18/2015ANALYST 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 ReviewMcDonalds Corp.: Two Market-Implied Ratings Fall Fixed-income investors in McDonalds dont have a taste for higher leverage. Over the past two months the bond-implied rating of McDonalds slipped by two notches to A3 (Figure 1). The CDS-implied rating dipped a notch to A2. But the EDF-implied rating did not vary from Aa2.FIGURE 1. MCDONALDS: MOODYS AND MARKET-IMPLIED RATINGS, 60 DAYS (DAILY DATA)Moody's Investors Service on November 11 downgraded McDonald's Corporations senior unsecured ratings to Baa1 from A3 and affirmed its short term commercial paper rating at Prime-2. The downgrade reflects the company's recent announcement that it intends to increase its returns to shareholders, the vast majority of which will be funded with additionalMOODY'S ANALYTICS CORPORATES2 19 NOVEMBER 2015 MARKET SIGNALS REVIEW: MCDONALDS CORP.: TWO MARKET-IMPLIED RATINGS FALLdebt. Moody's views this increase as McDonald's maintaining an aggressive financial policy that will result in a material deterioration in credit metrics and limit its financial flexibility. The ratings outlook is stable. 1According to our ratings gap-conditioned transition matrices, companies rated Baa1 with a bond-implied rating of A3 have historically outperformed the broad market 25% of the time, matched the markets performance 14% of the time, and underperformed the broad market 61% of the time in the following 12 months.The bond-implied ratings gap was +2 notches two months ago, and has moved d...
