CORPORATESISSUER COMMENT 31 AUGUST 2015THE SOUTHERN COMPANY (SO)Moodys Senior Unsecured Rating Baa1Moodys Outlook NEGBond-Implied Rating Baa1CDS-Implied Rating A3EDF-Implied Rating Aa2As of 8/31/2015ANALYST 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.This report was republished on 11 August 2015 with the following change: In the paragraph that starts, According to our ratings gap-conditioned transition matrices&, the numbers 62%, 5%, and 33% were changed to 78%, 6%, and 16%, respectively.Market Signals ReviewSouthern Company: Two Market-Implied Ratings Decline The bond- and EDF'-implied ratings for Southern Company were both down over the last year.The bond-implied rating was the worse of the two, steadily falling four notches from Aa3 to its current Baa1 (Figure 1), reflecting market concerns over higher acquisition-driven leverage measures. This market-implied rating is currently at its lowest since March 2013.FIGURE 1. SOUTHERN COMPANY: MOODYS AND MARKET-IMPLIED RATINGS, LAST YEAR (DAILY DATA)Southern Companys EDF-implied rating dropped from Aaa12 months ago to Aa2. The EDF-implied rating has not been this low since April 2011.MOODY'S ANALYTICS CORPORATES2 31 AUGUST 2015 MARKET SIGNALS REVIEW : SOUTHERN COMPANY: TWO MARKET-IMPLIED RATINGS DECLINEThe companys CDS-implied rating is A3, as it was a year ago. Over the year it moved between A1 and Baa1 on multiple dates.According to our ratings gap-conditioned transition matrices, companies rated Baa1 with a bond-implied rating of Baa1 outperformed the broad market 31% of the time over the following 12 months, matched the markets performance 15% of the time, and underperformed the broad market 54% of the time. Readers will recall that when a market-implied rating falls ...
