CORPORATESISSUER COMMENT 25 SEPTEMBER 2015VOLKSWAGEN AKTIENGESELLSCHAFT (VW)Moodys Sr. Unsecured Rating A2Moodys Outlook NEGBond-Implied Rating NACDS-Implied Rating Ba3EDF-Implied Rating B1As of 9/23/2015ANALYST 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 ReviewVolkswagen AG: Market-Implied Ratings Decline The CDS- and EDF'-implied ratings for Volkswagen both worsened over the last thirty days (Figure 1). The disclosure that VW utilized software to manipulate US Environmental Protection Agency emissions test data on some diesel-powered cars has had a profound impact on the market-implied ratings.FIGURE 1. VOLKSWAGEN: MOODYS AND MARKET-IMPLIED RATINGS, 30 DAYS (DAILY DATA)The companys CDS-implied rating is Ba3, down by five notches from Baa1 30 days ago. Until this recent drop the CDS-implied rating had never been lower than Baa2 over the last five years.MOODY'S ANALYTICS CORPORATES2 25 SEPTEMBER 2015 MARKET SIGNALS REVIEW: VOLKSWAGEN AG: MARKET-IMPLIED RATINGS DECLINEVolkswagens EDF-implied rating dropped from Ba3 one month ago to B1. The EDF-implied rating has not been this low since June 2012.We do not publish a bond-implied rating on VW, but at subsidiary VW Credit, Inc. the bond-implied rating weakened from A3 thirty days ago to Baa3, representing a -4 notch implied-ratings gap from the A2 senior unsecured (domestic) debt rating assigned to the entity.According to our ratings gap-conditioned transition matrices, companies rated A2 with a CDS-implied rating of Ba3 outperformed the broad market 49% of the time over the following 12 months, matched the markets performance 7% of the time, and underperformed the broad market 43% of the time.Readers will recall that when a market-implied rating falls the und...
