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Credit Insights

Enjoy the Quiet While It Lasts

Over the course of the next month, we expect a number of events may cause a disruption in the calm we have experienced.

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Now that earnings season is essentially over and European politicians are on vacation (and thus out of the headlines), volatility has dropped substantially. As volatility bounces along its lowest levels for the year, the flight to safety has receded, allowing markets to march higher and prod investors to reach for additional yield.

The average spread in the Morningstar Corporate Bond Index tightened 2 basis points to +174 last week, and the average spread on the Morningstar Eurobond Corporate Index tightened 9 basis points to +181. Both of these indexes have tightened to the lowest spread levels over the past year. The average spread in the eurobond index continues to be wider than the U.S. corporate index but may continue to tighten faster than the U.S. index during this cycle of "risk on" attitude. This could allow for some outperformance by investors with the ability to switch between dollar- and euro-denominated assets.

As the flight to safety has abated, the demand for Treasury bonds has declined, and yields have surged higher. The 10-year Treasury bond rose 15 basis points last week to 1.80% and has risen 30 basis points since the beginning of August. The 30-year Treasury bond rose 18 basis points to 2.92% and has risen 34 basis points since the beginning of August. Both of these levels represent each bond's highest yield since the middle of May. The increase in Treasury yields has more than offset the tightening credit spreads this month as the average yield of the Morningstar Corporate Bond Index has risen to 3.05% from its low of 2.90% at the end of July.

Contrary to the typical August slowdown, the new issue market remained relatively active last week. For corporations for which we issue credit ratings, $17.4 billion of new bonds were priced over the course of the week. Typically, new issuance slows in August, one of the quietest months of the year as investors head to the beach for the final days of summer. However, investors appear to have cash that needs to be put to work and all-in interest expense remain near historic lows, prompting issuers to take advantage of the liquidity and low rates while they're available. This supply was easily swept up, pushing new issue spreads inside where existing bonds were trading in many cases, as investors continue to pour money into corporate bond funds.

As investors discount credit risk, the financial sector (which is the most affected by systemic risk) has outperformed the industrial sector. The differential between the average spread of the financial sector versus the industrial sector in the Morningstar Corporate Bond Index is at it tightest level since July 2011.

Nothing Has Changed Over the Past Month
Credit spreads and sovereign credit risk have rallied strongly over the past month, which causes us to ask, What has really changed? As far as we can tell, not much, other than that investors continue to pour new money into bond funds. Policymakers have been talking tough, yet neither the Fed nor the European Central Bank has taken any concrete actions, or even proposed any new actions, to address slowing economic growth or the long-term financial viability of the peripheral eurozone nations. From a credit perspective, second-quarter earnings reports were generally a non-event, as most firm's credit metrics remained stable, although many management teams provided very cautious outlooks for the second half of the year. Economic indicators in the United States continue to reveal a mixed outlook, and the eurozone economy continues to weaken.

Over the course of the next month, we expect a number of events may cause a disruption in the calm we have experienced. At the end of August, the market's focus will be on Fed chairman Ben Bernanke's speech at the Federal Reserve's annual conference in Jackson Hole, Wyo., to see if he announces any changes in policy or reveals new plans to improve the transmission of easy monetary policy into the broader economy. In September, Moody's may conclude its rating evaluation of Spain. Moody's placed its Baa3 rating under review for possible downgrade in June and usually concludes its review within three months. Spanish banks continue to increase their borrowings from the ECB as they are essentially shut out of the public capital markets. It's still unclear as to the structure of the bailout offered to the Spanish banks and whether this debt will have to be guaranteed by the Spanish government, which would increase the country's debt/GDP ratio. Negotiations with Greece to allow the next installment of bailout funds should be concluded in September.

While the ECB may eventually purchase sovereign bonds in the secondary market in an attempt to force yields down for Spanish debt, the ECB is prohibited from directly financing governments. Later in September, the credit market's focus will be on Germany's Constitutional Court, which is expected to rule on whether the European Stability Mechanism is allowable under Germany's constitution. The risk is that if Germany is unable to ratify the ESM, it will take the eurozone back to square one in figuring out a way to finance the deficits and maturing debt of the peripheral countries. If the Constitutional Court rules against the ESM, we're not sure what tricks the eurozone has remaining up its sleeve. Further clouding the picture, Moody's announced that it placed the Aaa ratings of several core European countries, including Germany, on negative outlook. This is a wake-up call for many of Germany's politicians and its populace, as it highlights both ongoing and future costs of the eurozone crisis to Germany. A rating downgrade could be enough to sway Germany against supporting future bailout programs.

Sovereign Credit Risk Rallies Across the Core and Periphery
Sovereign bonds Spanish and Italian bonds continued their rally as their yields dropped and credit default swaps tightened across all the eurozone members last week. For example, Spain's 5-year CDS dropped to +477 (its lowest level in over three months), its 2-year bond rallied 46 basis points to 3.74%, and its 10-year bond rallied 45 basis points to 6.46%. In addition, Italy's 5-year CDS dropped to +433, its 2-year bond rallied 34 basis points to 3.06%, and its 10-year bond rallied 11 basis points to 5.79%. Credit default swaps for even beleaguered Portugal rallied as the spread dropped to +727, its lowest level in over a year. Within the core eurozone, German and French CDS levels declined to +56 and +130, respectively, their lowest levels over the past year.

Click to see our summary of recent movements among credit risk indicators.

Municipal Jabberwocky: What Is Really Going On?
Contributed by Jeff Westergaard, Director of Municipal Analytics

As one listens to the various "news" stories and prognostications about the municipal bond market lately, one is reminded of the ancient story of the blind men and the elephant. One feels its trunk and thinks it is a hose, the other an ear, which seems a fan, yet another the tail, which is like a rope, and so on. Only when they are told that the mysterious object is an elephant, something that is too big for any of them to "see" in its entirety, do they begin to understand the danger of making assumptions from examining only a part of the puzzle.

The municipal bond market is like the elephant. Nothing like it exists in securities markets for sheer numbers of issuers or individual securities. Even measuring the size of the municipal bond market has been contentious, as recent debate suggests there are roughly $1 trillion more outstanding bonds than had previously been accepted.

One of the great challenges presented by the municipal bond market is how to think about and then describe it with any degree of precision. Earlier this week, researchers at the Federal Reserve Bank of New York wrote in their Liberty Street Economics blog about the number of defaults that had occurred in the muni market compared with the widely reported studies by the three ratings agencies. The headline numbers look pretty bad--more than 2,500 defaults versus less than 100 for the rated bonds analyzed by the big three. The difference is that the Fed is counting unrated bonds.

This brings us to our main point: Much, if not most, of the commentary and discussion about munis of late lacks enough detail to be of use to investors or market participants. In the case of the Fed report, the relatively important statistic about the par value of bonds represented by the 2,500 defaults isn't disclosed. Meredith Whitney claiming that "hundreds of billions" of dollars of muni defaults without putting into context the fact that there are only 27 or 37 "hundreds" to begin with (depending on who is counting) seems rather disingenuous at best. Facts are getting misplaced at an alarming rate in the ongoing discussion about muni bonds post-financial crisis.

Likewise we see the terms bankruptcy and default being used interchangeably in many articles. They simply aren't the same. Bankruptcy, which remains statistically rare among municipal governments, does not mean mandatory default. However, it does introduce the possibility.

Lastly, much has been written about the performance of the high-yield sector of the municipal market. The usual rationale is that investors are behaving irrationally by setting aside prudent credit risk concerns in exchange for higher-yielding investments, the implication being that this is a course of action that will have dire consequences.

The common thread in all this is that the facts, details. and precision in analysis are absent from the commentary being promulgated. All municipal bonds are not equal. They constitute an incredibly diverse asset class, ranging from bonds issued by states as large as most sovereign nations to tiny real estate development-backed issues. Security for bondholders ranges from unconditional general obligation pledges of any and all legally available funds to very specifically defined legal covenants and financial resources. Trying to describe this market in general terms is impossible to do with any kind of degree of precision upon which to guide investors.

While all of this may not make for compelling headlines or emotion-grabbing opinion pieces, it does reinforce the main principles that Morningstar believes prudent investors in the muni market must keep in mind at all times. Careful analysis is absolutely essential in security selection. The muni market is no longer a homogeneous credit market. The safety net of bond insurance and blind belief in ratings no longer serve as a replacement for careful analysis of credit. Ongoing monitoring and surveillance of portfolio holdings are a necessary component of today's municipal bond market environment. Buy and hold does not mean buy and ignore.

The bottom line for us: Don't assume that the narrow perspective so often presented is the whole story; make sure that you have the appropriate facts to make an informed decision. Morningstar does not see "Apocalypse Now" for the municipal bond market overall, but pockets of turbulence are definitely real. Due diligence is your best weapon--be sure to use it at all times.

New Issue Notes
More New Issuance From the Tobacco Sector: Lorillard in the Market With 5-Year Notes (Aug. 16)
 Lorillard (LO, BBB) is in the market with $500 million of new 5-year notes. Proceeds will be used to buy back stock, as the firm announced that it is raising its formal debt leverage target to 1.5-2.0 times from 1.5 times debt/EBITDA. This additional leverage will not be enough to affect our BBB issuer credit rating. Based on our forecast, we estimate that the company can issue as much as $1 billion of debt in order to raise its leverage to an estimated 1.85 times projected 2012 EBITDA. This level of debt leverage places Lorillard roughly in line with our 2012 projected debt leverage for  Altria (MO, BBB), which we rate the same as Lorillard.

Lorillard's existing 3.50% senior notes due 2016 were last indicated at 157 basis points above Treasuries, and the firm's 6.875% senior notes due 2020 currently trade around 250 basis points above Treasuries. We think Lorillard's bonds are cheap for the credit risk, and the credit spread should tighten toward Altria's levels over time. For example, we think fair value for Lorillard's 6.875% senior notes due 2020 should be about 25 basis points behind Altria's 4.75% senior notes due 2021, which are trading around 130 basis points above Treasuries, providing investors almost 100 basis points of upside.

In the past two weeks, there has been a significant amount of new issues in the tobacco sector, which could cause some near-term indigestion, providing investors the opportunity to pick up paper. For example,  Philip Morris (PM, A-) issued $2.25 billion of bonds Aug. 15 consisting of 5-year bonds priced at 60 basis points above Treasuries, 10-year bonds at 90 basis points above Treasuries, and 30-year bonds at 120 basis points above Treasuries. The prior week, Altria issued $2.8 billion of bonds, consisting of 10-year bonds priced at 130 basis points above Treasuries and 30-year bonds at 168 basis points above Treasuries.

The spread on Lorillard's notes is significantly wider than the other tobacco names, as the firm's revenue depends on the menthol category. The Food and Drug Administration has been examining the menthol category to determine if additional restrictions or an outright ban on menthol products should be instituted. While the headlines surrounding the release of the panel's decision may sound dire, we think an outright ban is highly unlikely. The scientific evidence is ambiguous, local governments would lose a substantial amount of tax revenue, an underground market for menthol could emerge, thus limiting the FDA's ability to control the category, and 80% of menthol smokers are minorities. We expect the FDA will impose greater restrictions on the marketing and perhaps the availability of menthol cigarettes, which is incorporated in our forecast. Nevertheless, any restrictions imposed on the menthol category are likely to hurt Lorillard more than its more diversified peers. Once the FDA releases its conclusions, and assuming our opinion is correct, we expect credit spreads for Lorillard's bonds to tighten toward Altria's levels. Given where Altria is currently trading, that amount of spread compression could provide investors with seven points of upside potential.

O'Reilly Announces Bond Deal; We Think It Could Be Cheap (Aug. 16)
Investment-grade credit  O'Reilly Automotive (ORLY, BBB) is coming to market with a new $300 million 10-year deal. The new bonds could come at attractive spreads, in our view, as the firm's bonds trade much too wide on both an absolute and relative basis. O'Reilly's 4.625% notes due September 2021 are currently trading around 260 basis points over Treasuries--more than 40 basis points wide of Morningstar's 10-year BBB index. More significantly, they are more than 20 basis points wider than competitor  Advance Auto Parts' (AAP, BBB-) 10-year bonds, which we rate one notch lower than O'Reilly. We expect bonds will come in tight of existing levels given the amount of new issue demand, and we would recommend the bonds down to where the BBB index is trading (217 basis points over Treasuries). The top player in the auto parts retail category,  AutoZone (AZO, BBB), trades much too rich, in our view, at 157 basis points over Treasuries for 10-year maturities.

O'Reilly generates stable free cash flow generation and operates with moderate leverage and minimal near-term debt maturities. The firm's lease-adjusted leverage has declined to the 2 times range after repaying $400 million in net debt with $800 million in 10-year bonds issued in 2011. This also extended maturities, providing for a strong Cash Flow Cushion of well over 2 times our base-case expense and obligation forecast. While the firm does not pay a dividend, we do forecast a robust amount of share repurchases--roughly 100% of free cash flow. That said, we are not concerned, given O'Reilly's modest obligations and solid free cash flow.

The auto parts industry is generally stable, as it relies on demand for necessity items (such as maintenance and failure auto parts). We view the service element as sticky, given that most customers rely on the retailer's expertise when purchasing maintenance and failure auto parts. Although we expect auto parts retailers to continue to enjoy positive growth amid the lackluster recovery, we are cognizant of industry tailwinds, which have helped to spur years of outsize growth for the major players. Still, we have a positive fundamental view of the industry, and while we expect the rate of growth to decelerate, we see few near-term catalysts that would derail growth altogether. O'Reilly--the nation's second-largest auto parts retailer--is benefiting from industry tailwinds, but we also think the firm is strengthening its competitive position, as the industry increasingly resembles an oligopoly.

Deere's Bonds Look Fairly Valued Following Mixed 3Q Results (Aug. 15)
On Wednesday,  Deere (DE, A) reported mixed fiscal third-quarter results that reflected a decent continued selling environment for U.S. farm and construction equipment, but weakening international markets, the ongoing U.S. drought, and internal productivity issues led the firm to sharply reduce its net income and cash flow guidance for the fourth quarter. We have previously cautioned that although the dry weather in the Midwest has lifted global corn and soybean prices, farmers' poor sentiment can create near-term headwinds for the agricultural equipment sales environment. That said, we don't believe the long-term picture for the company has changed because of one year of drought. Deere now expects a bit weaker results from European and Asian farm markets over the course of fiscal 2012, likely due to broader economic concerns, and slower (though still strong) construction equipment gains due to similar overseas challenges, but its updated guidance more closely mirrors our own 2012 projections.

In the quarter, Deere's core farm equipment segment (80% of nonfinancial revenue) enjoyed a 14% top-line increase from a year ago, led by strong North American deliveries and continued positive pricing actions. Similarly, the firm's construction machinery business saw sales climb 23% year over year, as rebounding U.S. end markets more than offset some international weakness. However, new product launches and manufacturing inefficiencies led to only a 30-basis-point increase in operating margins, to 12.8% from 12.5% a year ago. In particular, the construction segment's profitability was quite weak, with margins ticking down to 6.8% from 8.1%; incremental margins were just 1%, down from 4% in the prior quarter and 14% in 2012's first quarter. The ag business' margins climbed slightly to 13.9% from 13.5%, probably partially a result of mix shift toward higher-horsepower tractors, which enjoyed stronger growth in the period than their lower-power counterparts, but incremental margins here also fell to 17% from 33% in the second quarter.

Management, per its revised guidance, expects relatively flat year-over-year operating profitability performance in the fourth quarter. The company reduced its net income forecast to $3.1 billion for the full year from a prior outlook of $3.35 billion, while pulling down its sales growth forecast to 13% from 15%; in all, we estimate that this implies operating margins around 11.7%, nearly identical to fourth-quarter 2011 performance. While this sales projection outpaces our own, the firm's lack of internal profitability gains is somewhat disconcerting, though we peg much of it to inventory corrections, the aforementioned product launches, and facility openings worldwide, rather than a sign of long-term structural issues. The firm now expects an even greater than previously outlined buildup of inventory and trade receivables for the full year, with negative cash flow implications, but we think these issues are short-term in nature, driven by a weaker current end market than expected earlier in the year. As Deere works down its inventory levels and completes its expansion plans in the U.S., Brazil, China, and elsewhere, we expect profitability could improve.

The balance sheet remains in good shape, appropriate for our A rating. Leverage at the manufacturing operations ticked up a bit during the quarter, with TD/EBITDA of 1.3 times for the trailing 12-month period compared with roughly 1.0 times at the end of fiscal 2011. However, net of cash, leverage was less than 1.0 times and should improve during the fourth quarter, typically a strong quarter for cash generation. For the fiscal year, we forecast roughly $1.5 billion of free cash flow at the manufacturing operations, providing ample liquidity.

We view Deere as a core holding and currently maintain a market weight recommendation on the bonds. Looking at comps, Deere tends to trade in line with  Caterpillar (CAT, A-). Our lower rating on Caterpillar is driven in part by significantly higher unfunded pension liabilities, which weighs on our Cash Flow Cushion score and supports our underweight recommendation on the bonds. Both Deere and Caterpillar have bonds in the 10-year part of the curve that were issued out of their manufacturing arms that were recently quoted around a spread of 70 basis points over Treasuries. Bonds at the respective financial services arms currently trade a bit wider, offering better value, in our view. We rate both financial services arms the same as their parents due to the inextricable linkage between the entities. John Deere Capital has a 2022 bond that was recently quoted around a spread of 85 basis points over Treasuries, providing an extra 15 basis points of yield relative to the parent bonds and about a 5-basis-point premium to similar maturity Caterpillar Finance bonds. If Deere's spreads widen on today's mixed results, we would look to add to current positions.

Potentially Attractive Bond Offering Coming From Thermo Fisher (Aug. 15)
 Thermo Fisher Scientific (TMO, A+) made plans to issue 5.5- and 10.5-year notes primarily to fund its $925 million acquisition of One Lambda. We don't anticipate changing our A+ rating of Thermo based on this deal or new issuance.

Thermo usually trades wider than the typical A+ rated firm we cover. For example, its 2021 issue has traded at a spread of 148 basis points above Treasuries in recent days, compared with the average A+ rated firm in the Morningstar Corporate Index, which trades around 85 basis points above Treasuries. We'd view Thermo's spreads as highly attractive compared with other A+ rated firms, including  Baxter (BAX, A+), which came to market last week with a 10-year issue at 80 basis points above Treasuries. In terms of the new 5.5-year notes, we see a relationship of about 40 basis points of spread differential in Thermo's on-the-run 5-year and 10-year notes, so we could see a similar spread differential in its new issues. That differential is also similar to the differential we saw from  Celgene's (CELG, A) 5-year (T+130) and 10-year (T+170) notes last week.

We believe Thermo's notes trade at attractive spreads primarily because it is currently operating with an inflated debt position (around 2.7 times adjusted EBITDA including this new issuance and the One Lambda acquisition) following some heavy acquisition activity during the past couple of years. We believe Thermo will deleverage from this high point, and we don't think it will have trouble repaying its obligations. From a business-quality perspective, we think the firm is advantaged and give it a narrow moat rating. Thermo Fisher remains the largest supplier of research instruments and consumables in the world, and it weathered the recent economic downturn better than many of its peers, as its one-stop-shop business model and sizable recurring revenue stream shielded it from capital-spending freezes across its end markets. Also, we believe its superior access to customers, broad product lineup, and admirable customer service allowed Thermo to actually capture market share during that tough economic climate. This business strength even in rough economic times should be attractive to debtholders, especially as Thermo deleverages after recent acquisitions.

Penske Automotive Issuing $400 Million of Senior Subordinated Bonds to Call Existing Bonds (Aug. 14)
 Penske Automotive Group (PAG, B+) announced its intent to issue $400 million in new 10-year Rule 144a senior subordinated notes, with the proceeds being used to call its $375 million of 7.75% senior subordinated notes due in 2016 at a total price of 104.25.  Sonic Automotive (SAH, B+) issued 10 noncall 5 senior subordinated notes in June at 7.125% and these are now indicated at 6.13%.  Asbury Automotive's (ABG, B+) 2020 maturity notes are indicated at 6.35%. On the high end,  AutoNation's (AN, BBB-) senior notes due 2020 are indicated at 4.54%. We view Penske in line with Sonic and Asbury, noting that Asbury is cheap to Sonic currently. With the high-yield market currently offering about 6.875%, and this sector typically trading somewhat tight for the ratings, we view fair value on the new deal at about 6.375%. We believe the fundamentals of this sector will allow it to perform well in a difficult market. With limited opportunities to invest in the sector, we believe this new issue could be a good entry point for investors to establish a core holding.

We remain very constructive on the auto dealer market, given its moaty characteristics. We believe domestic auto sales are likely to continue on a steady upward trend and the replenishment of lost inventories from production shortfalls from the Japanese Three manufacturers also should serve to boost the fortunes of the dealers. The follow-on parts and services operations provide steady operating income, leading to narrow moats on our coverage list of dealers. A highly variable operating cost structure allows for further downside protection.

On July 31, Penske reported second-quarter results that beat consensus. Same-store retail revenue increased 9.4% year over year (10.3%, excluding foreign exchange) while same-store retail unit sales increased 12%. We are also encouraged to see Penske's international retail unit sales increase 27% because Europe is in a recession. Fortunately for Penske, most of its European business is in the United Kingdom, which is posting far stronger volume than the rest of Europe. We expect continued strong growth in the second half of the year as automakers roll out new model year vehicles and the U.S. industry continues to mean revert over the coming years to at least 16 million units.

Philip Morris Back in the Market, Lorillard Has More Upside (Aug. 14)
 Philip Morris (PM, A-) is reportedly back in the market and issuing debt consisting of 5-year, 10-year, and 30-year notes, in benchmark size. In March, Philip Morris issued 1.625% senior notes due 2017, which are currently trading at 52 basis points above Treasuries and 4.50% senior notes due 2042, which are currently trading at 100 basis points above Treasuries. The firm's closest comparison to a new 10-year is the existing 2.90% senior notes due 2021, which are trading around 80 basis points above Treasuries.

Considering the strength in the corporate bond market as investors have more cash than they know what to do with, we doubt the new issue will price at much, if any, concession to the existing bonds. We think Philip Morris' existing bonds are fairly valued to slightly overvalued, and the bonds will move in line with the market. As a comparison,  Altria's (MO, BBB) recently issued 2.85% senior notes due 2022 are marked at around 132 basis points above Treasuries, and the 4.25% senior notes due 2042 are indicated at about 163 basis points above Treasuries.

Within the tobacco sector, we think  Lorillard (LO, BBB) notes have significantly more upside, as described above.  

Duke Energy's 5- and 10-Year New Issue Looks Rich Compared With Scana (Aug. 13)
 Duke Energy (DUK, BBB+) announced that it plans to issue 5- and 10-year notes. We believe the 5-year bonds will price in the 105 basis points above Treasuries range and the 10-year bonds will price in the range of 145 basis points above Treasuries. At these levels, we view Duke's new issue to be fairly valued when compared with both Morningstar's 10-year BBB+ index of 161 basis points above Treasuries and, more important, to the utility subsector within the Morningstar 10-year index, which trades roughly 25 basis points tighter to the overall index. When compared with Duke Energy's closest BBB+ rated peer,  Scana's (SCG, BBB+) 10-year parent company bonds look more attractive in the 215 basis points above Treasuries range.

Duke Energy and Progress Energy completed their all-stock merger in early August, creating the largest regulated utility in the U.S. Progress became a wholly owned subsidiary of Duke Energy. Both Duke and Progress operate in historically favorable regulatory territories in the Southeast, resulting in bonds that trade roughly in line with one another. We believe the consolidated company's credit statistics will improve, and we project postmerger leverage of roughly 5 times and interest coverage of roughly 4 times, albeit slightly better metrics than Scana. However, given that both Duke/Progress and Scana are fully regulated utilities with equally favorable means of recovery, we prefer Scana's 70-basis-point spread pickup.

J.P. Morgan Chase's New 5-Year Looks Fairly Valued (Aug. 13)
 J.P. Morgan Chase (JPM, A) announced last Monday that it plans to issue new benchmark 5-year notes. Whisper on price guidance is in the area of 145 basis points above Treasuries, which appears to be about 20 basis points cheap to existing notes. We expect final pricing to be 5-10 basis points tighter. At these price levels, we view the bonds as fairly valued. While we are comfortable with J.P. Morgan Chase from a credit perspective, even after its large London trading loss, we view  Citigroup (C, A-) as better relative value play. Citigroup's 5-year trades in the area of 215 basis points above Treasuries, approximately 75 basis points wider than where we think these new J.P Morgan Chase 5-years will price. Even though we rate J.P Morgan Chase one notch higher, the spread differential is too great, in our opinion. We believe that most of the spread differential is due to J.P. Morgan's perceived stellar reputation, which, while we acknowledge has some value, is probably overvalued by the market.

Click here to see more new bond issuance for the week ended Aug. 17, 2012.

David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.