U.S. Long-Term Rating Lowered To ‘AA+’; Outlook Negative By Nikola G. Swann, Toronto

The downgrade on the United States of America reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what would be necessary to stabilize the government’s medium-term debt dynamics. More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.

Features

8 Transcript Of Standard & Poor’s Teleconference Held On Aug. 8, 2011: United States of America Long-Term Rating Lowered To ‘AA+’, Outlook Negative By David T. Beers, London

David Beers, global head of sovereign ratings and managing director; and John Chambers, managing director and chairman of the sovereign ratings committee, discuss key reasons for the U.S. downgrade. They explain, among other things, the baseline assumption Standard & Poor’s used to arrive at the rating decision, and what would it take for the U.S. to return to a ‘AAA’ rating.

17 U.S. Sovereign Rating Downgrade Has Knock-On Effects For Some Borrowers

By Curtis Moulton, New York

While we don’t view sovereign ratings as ceilings for other entities, sovereign credit risk is a key factor in nonsovereign ratings because the wide-ranging powers and resources of a government can affect

the financial, operating, and investment environments of entities under its jurisdiction.

Credit FAQ 22 Understanding Ratings Above The Sovereign By Laura Feinland Katz, New York

Due to heightened interest in our approach to issuing ratings that are above the sovereign’s for government-

related entities, banks, insurers, corporations, state, regional, or local governments, and securitizations, we clarify in this article our methodologies, provide examples of how we put them into practice, and answer frequently asked questions.

28 U.S. Downgrade Doesn’t Currently Affect Top-Rated U.S. Nonfinancial Corporate Borrowers By Ronald M. Barone, New York

The sovereign downgrade will not affect the ratings or stable rating outlooks on the six U.S.-domiciled highest- rated nonfinancial corporate issuers: ExxonMobil Corp., Johnson & Johnson, Microsoft Corp., General Electric Co., Automatic Data Processing Inc., and W.W. Grainger Inc.

31 Rating Actions Were Taken On 10 U.S.-Based Insurance Groups By Neal Freedman, New York

Our view of these companies’ fundamental credit characteristics has not changed. Rather, the rating actions reflect the application of criteria and our view that the link between the ratings on these entities and the sovereign credit ratings on the U.S. could lead to a decline in the insurers’ financial strength. This is because these companies’ businesses and assets are highly

concentrated in the U.S.

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August 17, 2011 | Volume 31, No. 31

Special Report