CORPORATESISSUER COMMENT 8 June 2016RATINGSYUM! BRANDS, INC. (YUM) Moodys SR Unsecured Rating B2Moodys Outlook NEGBond-Implied Rating Ba1CDS-Implied Rating Ba3EDF-Implied Rating Baa3As of June 6, 2016ContactsXian Li 1.212.553.1404Senior Research Analyst xian.li@moodys.comAllerton 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.In Figure 4 the words commercial bank were replaced by the words petroleum refining.Market Signals ReviewYUM! Brands: Two Market-Implied Ratings Recover Slightly The current bond- and CDS-implied ratings for YUM are both better than their worst levels of the past year.Moodys downgraded YUMs senior unsecured ratings three times over the past twelve months, from Baa3 to its five-year lowest point of B2 currently. The bond-implied rating for YUM dipped to Ba2 (its worst ever) on the day of the first downgrade, October 21, 2015 (Figure 1). It varied between Ba2 and Ba1 since then and is Ba1 today. The CDS-implied rating was Baa3 a year ago and deteriorated sharply to B2 at the downgrade. It has been as high as Ba2 and as low as B2 since then. The current CDS-implied rating has recovered to Ba3.YUMs EDF'-implied rating was Baa2 a year ago; it dropped one notch to Baa3 in October 2015 and again in March 2016, and remains there today.FIGURE 1. YUM: MOODYS AND MARKET-IMPLIED RATINGS, LAST 365 DAYS (DAILY DATA)According to our ratings gap-conditioned transition matrices, companies rated B2 with a bond-implied rating of Ba1 outperformed the broad market 10% of the time overMOODY'S ANALYTICS CORPORATES2 8 June 2016 Market Signals Review: YUM! Brands: Two Market-Implied Ratings Recover Slightlythe following 12 months, matched the markets performance 17% of the time, and underperformed the broad market 73% of the time.YUMs bond...
