CORPORATESISSUER COMMENT 11 April 2016RATINGSVOLKSWAGEN AKTIENGESELLSCHAFT (VW) Moodys SR Unsecured Rating A3Moodys Outlook NEGBond-Implied Rating NACDS-Implied Rating Ba2EDF-Implied Rating B1As of April 8, 2016ContactsAllerton 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 Reflect Continuing Investor Worries The CDS- and EDF'-implied ratings for Volkswagen both match their observations from 90 days ago (Figure 1). Over the period each market-implied rating moved up by one notch briefly, but was unable to sustain the advance.FIGURE 1. VOLKSWAGEN: MOODYS AND MARKET-IMPLIED RATINGS, 90 DAYS (DAILY DATA)The companys CDS-implied rating is Ba2, down by five notches from A3 one year ago. While now better than at the low point of B1 observed last November, the current significant difference between the CDS-implied rating and Moodys rating signals that investors concerns continue. The disclosure last fall that VW used software to manipulate US Environmental Protection Agency emissions test data on some diesel-powered cars has had a profound impact on VWs market-implied ratings.Over the last three months, VWs EDF-implied rating varied between B1 and Ba3. It dropped three notches over the past year, from Ba1 to B1. The EDF-implied rating has not been this low since June 2012.MOODY'S ANALYTICS CORPORATES2 11 April 2016 Market Signals Review: Volkswagen AG: Market-Implied Ratings Reflect Continuing Investor WorriesWe do not publish a bond-implied rating for VW, but at a debt-issuing subsidiary, VW Credit, Inc., the bond-implied rating weakened from Baa1 one year ago to Baa3, a -3 notch bond-implied ratings gap from the A3 senior unsecured (domestic) debt rating assigned to the entity.According to o...
