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Created and Owned by America's Electric Cooperative Network

S&P Applies Revised Ratings Methodologies to CFC


For Release: December 12, 2014

Contact: Brad Captain, Corporate Relations; Ling Wang, Banking & Investor Relations

Changes applied broadly to ‘nonbank financial institutions’

DULLES, Va.—Standard & Poor’s Ratings Services (S&P) has revised its Issue Credit Ratings methodology for nonbank financial institutions (NBFIs), resulting in a change in the rating of senior secured debt issued by the National Rural Utilities Cooperative Finance Corporation (CFC) from A+ to A. S&P affirmed its issuer credit rating of CFC at A with a change in outlook to “negative” based on its revised rating methodology for NBFIs.

In announcing the revisions, S&P stated “the rating actions were driven by revisions to our criteria rather than a sudden change of the issuers’ creditworthiness.”

“CFC is in the strongest financial position of our 45-year history, which remains the case regardless of any change in ratings methodologies,” CFC CEO Sheldon C. Petersen said. “That strength is the result of a steadfast financial discipline that we will continue to demonstrate while doing what we do best—serving the electric cooperative network.”

“How CFC operates as a nonprofit, member-owned finance cooperative—including our current financial position, and the credit quality and strength of our member-owners—cannot be fully captured in the formulaic assessment presented through S&P’s revised criteria,” CFC Senior Vice President and CFO Andrew Don said. “Nonetheless, maintaining CFC’s investment-grade rating of A is fundamental to our business model, and we intend to take steps to return the rating outlook to stable.”

The revised Issue Credit Ratings methodology equalizes senior secured debt issued by all investment-grade NBFIs at the same level as the issuer credit rating. The change only affects CFC’s senior secured debt; CFC’s corporate and short-term credit ratings remain unchanged.

“CFC’s senior secured debt issuances—specifically collateral trust bonds (CTBs)—have consistently been valued by investors based on the quality of our electric cooperative loans pledged as collateral,” Don said. “S&P’s equalization action fails to recognize the value of
that collateral.”

Moody’s Investors Service’s (Moody’s) assessment of CFC remains unchanged. On Nov. 24, 2014, Moody’s reaffirmed CFC’s senior secured debt rating of A1, senior unsecured debt rating of A2, subordinate debt rating of A3 and short-term rating of P-1 with a stable outlook.

“CFC has worked strategically for more than a decade to reach our current financial position from the perspective of liquidity, earnings, leverage, funding sources and credit quality,” Petersen said. “Our financial results speak for themselves.”

CFC’s most recently reported financial results for the quarter ended Aug. 31, 2014, are available on the CFC website and as filed with the U.S. Securities and Exchange Commission.

This press release contains forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, and are generally identified by our use of words such as “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity” and similar expressions, whether in the negative or affirmative. All statements about future expectations or projections are forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, actual results and performance could materially differ. Factors that could cause future results to vary from current expectations are included in our annual and quarterly periodic reports previously filed with the U.S. Securities and Exchange Commission. Except as required by law, we undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date on which the statement is made.

About CFC

The National Rural Utilities Cooperative Finance Corporation (CFC) is a nonprofit finance cooperative created and owned by America’s electric cooperative network. With more than $22 billion in assets, CFC is committed to providing unparalleled industry expertise, flexibility and responsiveness to serve the needs of our member-owners. CFC is an equal opportunity provider and employer. Visit us online at www.nrucfc.coop.



Brad Captain
CFC Corporate Relations

Ling Wang
CFC Banking & Investor Relations