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Created and Owned by America's Electric Cooperative Network

S&P Issues Research Update on CFC Based on Revised Methodologies


For Release: December 18, 2014

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

DULLES, Va.—Standard & Poor’s Ratings Services (S&P) has published a research update on the National Rural Utilities Cooperative Finance Corporation (CFC) following a previously announced affirmation of its issuer credit rating of CFC at A with a change in outlook to “negative,” based on revised methodologies for nonbank financial institutions (NBFIs).

“As S&P has indicated, its rating actions were driven by revisions to their criteria rather than a sudden change of CFC’s creditworthiness,” CFC Senior Vice President and CFO Andrew Don said. “CFC’s credit fundamentals have not changed. Our recent fiscal year was one of our most successful in terms of key metrics including funding sources, liquidity, capital and earnings.”

S&P’s updated assessment characterizes CFC’s business position as “very strong,” with an outlook revision based on its view of CFC’s “significant use” of short-term debt as a funding source. S&P notes CFC could “further buttress its funding and liquidity by reducing short-term debt,” particularly nonmember commercial paper.

“As part of our liquidity practice, CFC’s longstanding and publicly-disclosed objective is to maintain a total outstanding balance of dealer commercial paper and bank bid notes at 15 percent or less of total debt outstanding—in fact, that balance has averaged less than 10 percent for the past five years,” Don said. “But in conforming to S&P’s revised criteria, we will take steps in the near-term to reduce our use of short-term debt. Our goal is to return our rating outlook to stable.”

Revisions to S&P’s Issue Credit Ratings methodology for NBFIs also resulted in a change in the rating of CFC’s senior secured debt—primarily collateral trust bonds (CTBs)—from A+ to A. Prior to the revisions, S&P rated CFC’s CTBs a notch above its issuer credit rating. The revised criteria no longer allow for such notching, according to S&P, regardless of the nature of underlying collateral.

“CFC’s CTBs have consistently been valued by investors for their underlying collateral, comprised of utility first mortgage notes,” Don said. “S&P’s equalization methodology fails to recognize the quality of that collateral.”

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