4Q and FY 2023 Investor Presentation
Illustrative Impact of Adding a Moody's Credit Rating
NOT RATED BY MOODY'S
$500,000,000
1.20%
500
6.20%
= $31,000,000
5 years
= $155,000,000
Example: 5-year $500 million corporate bond
Bond
5-Yr US Treasury Bond Rate
Option Adjusted Spread (bps)1
Interest Rate
Annual Interest Payments
Term
Total Interest Expense over the Term
RATED BY MOODY'S
$500,000,000
1.20%
435
5.55%
= $27,750,000
5 years
= $138,750,000
Over $16 million in total interest expense vs. cost of rating
Note: Illustrative spread differential based on an independent study performed by BDO in June 2022 on a snapshot of data from January 31, 2022, which shows that a five-year $500M bond with a Moody's credit rating (when rated at the same level as
S&P and/or Fitch) has an -13% lower Option Adjusted Spread (OAS), which results in a savings of ~65 basis points per year. The study only applies to corporate bonds and not to sovereign/quasi-sovereign/municipal or structured finance bonds.
Many factors go into the pricing of a bond.
1. Option Adjusted Spread is the measurement of the credit spread of a fixed-income security rate and the risk-free rate of return (Treasury yields), adjusted for embedded options.
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4Q and FY 2023 Investor Presentation
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