CORPORATESISSUER COMMENT 15 SEPTEMBER 2015THE KROGER CO. (KR)Moodys Senior Unsecured Rating Baa2Moodys Outlook STABond-Implied Rating Baa1CDS-Implied Rating A1EDF-Implied Rating Aa1As of 9/14/2015ANALYST 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 ReviewThe Kroger Co.: Bond-Implied Rating Rises The bond-, CDS- and EDF'-implied ratings for Kroger followed different paths over the last three months (Figure 1).The bond-implied rating improved by one notch to Baa1. The CDS-implied rating is A1, matching the level 90 days ago. During the period it fluctuated between A2 and A1. The EDF'-implied rating also currently matches its level of 90 days ago, Aa1. On September 9 it dipped briefly to Aa2.FIGURE 1. KROGER: MOODYS AND MARKET-IMPLIED RATINGS, 90 DAYS (DAILY DATA)According to our ratings gap-conditioned transition matrices, companies rated Baa2 with a bond-implied rating of Baa1 outperformed the broad market 28% of the timeMOODY'S ANALYTICS CORPORATES2 15 SEPTEMBER 2015 MARKET SIGNALS REVIEW: THE KROGER CO.: BOND-IMPLIED RATING RISESover the following 12 months, matched the markets performance 14% of the time, and underperformed the broad market 57% of the time.Readers will recall that when a market-implied rating falls, the underlying securities have underperformed the broad market, and when a market-implied rating rises the underlying securities have outperformed the broad market. 1Over the last three months, Krogers bond-implied ratings gap advanced by one notch to +1 notch (Figure 2). The CDS-implied ratings gap is now at +4 notches and the EDF-implied ratings gap is +7 notches, both matching their levels of three months ago.FIGURE 2. KROGER: MARKET-IMPLIED RATING GAPS, LAST 90 DAYS (DAILY DATA)MOODY'S AN...
