Rating Action: Moody's upgrades Avis Budget's rental car ABSGlobal Credit Research - 28 Apr 2021New York, April 28, 2021 -- Moody's Investors Service, ("Moody's") has upgraded the ratings on 20 tranches of rental car asset-backed securities (ABS) issued by Avis Budget Rental Car Funding (AESOP) LLC (AESOP or the issuer). The issuer is an indirect subsidiary of the transaction sponsor and single lessee, Avis Budget Car Rental, LLC (ABCR, B2 negative). ABCR, a subsidiary of Avis Budget Group, Inc., is the owner and operator of Avis Rent A Car System, LLC (Avis), Budget Rent A Car System, Inc. (Budget), Zipcar, Inc. and Payless Car Rental, Inc. (Payless). AESOP is ABCR's rental car securitization platform in the U.S. The collateral backing the notes is a fleet of vehicles and a single lease of the fleet to ABCR for use in its rental car business.COMPLETE RATING ACTIONSIssuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2016-1Series 2016-1 Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2016-1 Class B, Upgraded to Baa1 (sf); previously on Jul 10, 2020 Downgraded to Baa2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2016-2Series 2016-2 Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2016-2 Class B, Upgraded to Baa1 (sf); previously on Jul 10, 2020 Downgraded to Baa2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2017-1Series 2017-1 Fixed Rate Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2017-1 Fixed Rate Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2017-2Series 2017-2 Fixed Rate Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2017-2 Fixed Rate Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2018-1Series 2018-1 Fixed Rate Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2018-1 Fixed Rate Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2018-2Series 2018-2 Fixed Rate Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2018-2 Fixed Rate Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2019-1Series 2019-1 Fixed Rate Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2019-1 Fixed Rate Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2019-2Series 2019-2 Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2019-2 Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2019-3Series 2019-3 Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2019-3 Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2020-1Series 2020-1 Rental Car Asset Backed Notes, Class A, Upgraded to Aa1 (sf); previously on Jul 10, 2020 Downgraded to Aa2 (sf)Series 2020-1 Rental Car Asset Backed Notes, Class C, Upgraded to Ba1 (sf); previously on Jul 10, 2020 Downgraded to Ba2 (sf)RATINGS RATIONALEMoody's actions on the rental car ABS are prompted by (1) a decrease in our mean non-program haircut assumption upon sponsor default, to 19% from 25%, supported by the strength in used vehicle prices, and (2) consideration of the vastly improved rental car market conditions, particularly when evaluating sensitivity analysis related to the likelihood of lease acceptance.Moody's also considered ABCR's effective fleet management during the coronavirus-driven credit shock. Avis' fleet utilization has continued to rise as a result of their controlled de-fleeting efforts and the recovery in rental car demand.According to J.D. Power, wholesale auction prices are now 17% higher than their previous peak back in August 2020, and at 29% above their level at the end of December 2020 as of the week ending April, 23 2021.[1]As of 31 March 2021, the notes benefitted from available credit enhancement consisting of subordination and over-collateralization, to protect investors against a meaningful decline in the value of the underlying vehicles (around 34%-37% credit enhancement behind the Class A notes, around 27%-29% enhancement behind the Class B notes and around 21%-23% enhancement behind the Class C notes).If ABCR were to file for bankruptcy, Moody's continues to assume that the company would be more likely to reorganize under a Chapter 11 filing, as a reorganization would likely realize significantly more value as an ongoing business concern than a liquidation of its assets under a Chapter 7 filing. Moody's view considers the strength of the ABCR brand (one of the three major car rental companies in North America) and the ongoing recovery of the rental car industry.Moody's continues to assume a 75% probability that ABCR would affirm its lease payment obligations in the event of a Chapter 11 bankruptcy, informed by pandemic-driven events that affected the rental car market (such as the drastic and sudden decline in rental car demand and the resulting high lease payments for a vastly underutilized fleet). The assumed high likelihood of lease acceptance recognizes the strategic importance of the ABS financing platform to ABCR's operation.The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of corporate assets from a gradual and unbalanced recovery in US economic activity.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Below are the assumptions Moody's applied in the analysis of this transaction:Risk of sponsor default: Moody's assumed a 60% decrease in the probability of default (from Moody's idealized default probability tables) implied by the B2 rating of the sponsor. Moody's arrives at the 60% decrease assuming an 80% probability that ABCR would reorganize under a Chapter 11 bankruptcy and a 75% probability that ABCR would affirm its lease payment obligations in the event of a Chapter 11 bankruptcy.Disposal value of the fleet: Moody's assumed the following haircuts to the net book value (NBV) of the vehicle fleet:Non-Program Haircut upon Sponsor Default -- Mean: 19%Non-Program Haircut upon Sponsor Default -- Standard Deviation: 6%Fixed Program Haircut upon Sponsor Default: 10%Additional Fixed Non-Program Haircut upon Manufacturer Default: 20%Fleet composition -- Moody's assumed the following fleet composition (based on NBV of vehicle fleet):Non-program Vehicles: 90%Program Vehicles: 10%Non-program Manufacturer Concentration (percentage, number of manufacturers, assumed rating): Aa/A Profile: 20%, 2, A3 Baa Profile: 60%, 3, Baa3 Ba/B Profile: 20%, 1, B1 Program Manufacturer Concentration (percentage, number of manufacturers, assumed rating): Aa/A Profile: 0%, 0, A3 Baa Profile: 80%, 2, Baa3 Ba/B Profile: 20%, 1, B1 Manufacturer Receivables: 0%; receivables distributed in the same proportion as the program fleet (Program Manufacturer Concentration and Manufacturer Receivables together should add up to 100%)Correlation: Moody's applied the following correlation assumptions:Correlation among the sponsor and the vehicle manufacturers: 10%Correlation among all vehicle manufacturers: 25%Default risk horizon -- Moody's assumed the following default risk horizon: Sponsor: 5 years Manufacturers: 1 year A fixed set of time horizon assumptions, regardless of the remaining term of the transaction, is used when considering sponsor and manufacturer default probabilities and the expected loss of the related liabilities, which simplifies Moody's modeling approach using a standard set of benchmark horizons.Detailed application of the assumptions are provided in the methodology.PRINCIPAL METHODOLOGYThe principal methodology used in these ratings was "Moody's Global Approach to Rating Rental Fleet Securitizations" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1232483. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors that would lead to an upgrade or downgrade of the ratings:UpMoody's could upgrade the ratings of the notes as applicable if, among other things, (1) the credit quality of the lessee improves, (2) the credit quality of the pool of vehicles collateralizing the transaction strengthens, as reflected by a stronger mix of program and non-program vehicles and stronger credit quality of vehicle manufacturers.DownMoody's could downgrade the ratings of the notes if, among other things, (1) the credit quality of the lessee weakens, (2) an increase in the likelihood of a sudden disposition of the underlying vehicles in another depressed used-vehicle market due to a continued resurgence or a second wave of COVID-19, (3) the credit quality of the pool of vehicles collateralizing the transaction weakens, as reflected by a weaker mix of program and non-program vehicles and weaker credit quality of vehicle manufacturers, (4) sharper than expected declines in vehicle prices of non-program vehicles owing to sustained weakness in the demand for used vehicles and prolonged disruptions to used-car sales channels, or (5) the tail periods become insufficient because US sales channels shut down again for a prolonged period and therefore vehicle disposition proceeds may be insufficient to repay the notes.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.In rating this transaction, Moody's used a cash flow model to model cash flow stress scenarios to determine the extent to which investors would receive timely payments of interest and principal in the stress scenarios, given the transaction structure and collateral composition.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.[1] Used Market Update, J.D. Power, 23-Apr-2021Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Corina Teodora Bot Associate Lead Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Karen Ramallo Senior Vice President/Manager Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​