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International Public Finance

ww w.fitchratings.com M

Credit Market Research Fitch Ratings International PublicFinance 2009 Transition andDefault Study

Summary This study provides data and analysis on the performance of Fitchs international publicfinance ratings in 2009 and over the long term, covering the period 1995 2009. Thereport offers key summary statistics on the years rating transitions. The study capturesthe long-term issuer foreign currency ratings of subnational governments, as well as theratings of international public sector entities social housing, higher education,healthcare, and public transportation, among others. At the end of 2009, of the 214international public finance issuers rated by Fitch, the majority 79% wereassigned investment-grade ratings by Fitch. Geographically, European issuers continuedto account for the bulk of these ratings (89%), while by country, Italy represented thelargest share 28% of all Fitch-rated international public finance issuers.

The global recession left a lasting impact on sovereign nations as well as local andregional authorities, faced with shrinking revenues and bulging deficits. Despite theserecent economic difficulties, the rate of downgrades among Fitch-rated internationalpublic finance issuers remained relatively modest in 2009, edging lower to 4.2% from5.2% in 2008. Upgrades however contracted to 2.6% from 8.7% a year earlier. As a result,the international public finance downgrade to upgrade ratio turned negative in 2009,with downgrades outpacing upgrades by 1.6 to 1, up from positive results of 0.6 to 1recorded a year earlier. There were no Fitch-rated international public finance issuerdefaults in 2009, echoing 2008s results.

As previously noted, Fitchs international public finance coverage is weighted heavilywith European issuers and therefore the sectors outlook as discussed here is greatlyinfluenced by Fitchs expectations for Europe. Fitch believes downward rating pressurewill continue in Europe in 2010, either through rating downgrades for those entities

Analysts

Charlotte L. Needham+1 212 [email protected]

Fernando Mayorga+1 34 93 323 [email protected]

David Riley+1 44 20 7417 -6338 [email protected]

Mariarosa Verde+1 212 [email protected]

Related Research

Fitch Ratings Global CorporateFinance 2009 Transition andDefault Study, March 18, 2010

Fitch Ratings Sovereign 2009Transition and Default Study,March 25, 2010

Fitch Ratings U.S. Public FinanceTransition and Default Study 1999 2009, March 25, 2010

Index of Key Exh ibits

Fitch International Public FinanceAverage Cumulative Default Rates .... 6

Fitch Three-Year Default RateStatistics................................... 9

Fitch 2009 and Multi-Year TransitionTables ....................................10

0

5

10

15

20

25

2002 2003 2004 2005 2006 2007 2008 2009

0246810121416

No. of Upgrades No. of Downgrades % Upgraded % Downgraded

aCompares beginning-of-year rating with end-of-year rating; does not count multiple rating actions throughout the year.Note: Rating changes defined at the modifier level, making a distinction between +/-.Source: Fitch.

(No.)

Fitch International Public Finance Historical Rating Changes a

(%)
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2Fitch Ratings International Public Finance 2009 Transition and Default Study March 26, 2010

that the agency considers to have long-term structural problems, or through continued

revisions of Rating Outlooks to Negative. These are mainly subnationals that have agreater reliance on fiscal revenue related to economic activity in their territory, suchas personal income tax, corporate income tax, or value-added tax; or taxes related toproperty transactions, such as stamp duty. The continued weak economic environmentwill result at best in a modest rise in tax revenue compared with 2008, or at worst in adecline, as experienced by a number of subnationals in 2009 some registeringdeclines in tax revenue of up to 20%. In addition, capital expenditures will remain highas these entities adopt anti-cyclical measures to boost economic activity, in parallelwith policies adopted by various central governments. Therefore, Fitch expects higheroverall deficits to continue into 2010, and in some cases this will be at the operatingbalance level, as some subnationals have found it difficult to rein in operatingexpenditures.

Highlights The margin of international public finance downgrades to upgrades slipped into

negative territory in 2009, with downgrades exceeding upgrades by 1.6 to 1, upfrom the more benign 0.6 to 1 margin recorded in 2008. The negative rating driftwas the worst for the broad sector since the last period of economic weakness

Fitch International Public Finance Rating Movements Across MajorRating Categories(%)

Average Annual1995 2008 2008 2009

Downgrade Upgrade Downgrade Upgrade Downgrade UpgradeAAA 1.75 N.A. 2.70 N.A. 0.00 N.A.AA 1.36 1.63 1.64 0.00 0.00 0.00A 0.75 1.50 2.94 5.88 2.86 0.00BBB 5.36 10.71 15.38 0.00 0.00 0.00BB 12.12 4.55 4.76 4.76 0.00 0.00B 12.77 21.28 0.00 14.29 0.00 0.00CCC to C 19.44 11.11 0.00 0.00 0.00 0.00

Note: Data enhancement efforts may lead to slightly different results than previously published. Current study supersedes allprior statistics. N.A. Not applicable.Source: Fitch.

05

1015202530

3540

AAA AA A BBB BB B CCC toC

2008 2009

aRatings at year-end.Source: Fitch.

(%)

Fitch International Public Finance Ratings

Distribution by Major Rating Category a

0

50

100

150

200

250

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

Investment Grade Non-Investment Grade

aRatings at year-end.Source: Fitch.

(No.)

Fitch Growth and Distribution of

International Public Finance Ratings a

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Fitch Ratings International Public Finance 2009 Transition and Default Study March 26, 2010 3

earlier in the decade 2001 and2002 which saw downgrade-to-upgrade ratios of 2 to 1 and2.5 to 1, respectively.

Downgrades actually declined in2009 to eight from nine a yearearlier, while upgrades tumbledthreefold year-over-year to five from 15.

The share of investment-grade international public finance issuer downgrades fell

in 2009 to 3.2%, declining from 5.5%, while upgrades slowed to less than 1%, downfrom 5.5% in 2008. Negative rating activity among non-investment grade issuersadvanced in 2009, with downgrades climbing to 8.3% from 3.6% a year earlier,whereas upgrades fell by more than half to 11.1% from 25% in 2008.

Fitch International Public FinanceRatings Distribution by Country 2009 a

Country Ratings (%)Argentina 1 0.5Australia 4 1.9Azerbaijan 1 0.5Bulgaria 1 0.5Canada 6 2.8Colombia 1 0.5France 25 11.7Germany 16 7.5India 1 0.5Italy 60 28.0Kazakhstan 2 0.9Korea (South), Republic of 1 0.5Morocco 3 1.4Nigeria 5 2.3Poland 19 8.9Portugal 3 1.4

Romania 4 1.9Russian Federation 23 10.7South Africa 1 0.5Spain 25 11.7Switzerland 1 0.5Turkey 4 1.9Ukraine 3 1.4United Kingdom 4 1.9Total 214 100aAs of Dec. 31, 2009 and includes Long Term Issuer ForeignCurrency RatingsSource: Fitch.

LatinAmerica/

Carib.1%

NorthAmerica

3%

MiddleEast/Africa

4%Asia/

Pacific3%

Europe89%

aAs of Dec. 31, 2009.Source: Fitch.

Fitch International Public Finance

Ratings Distribution by Region a

(2009)

0123456

789

2003 2004 2005 2006 2007 2008 2009

No. of Upgrades No. of Downgrades

aCompares beginning-of-year rating with end-of-year rating; doesnot count multiple rating actions throughout the year.Note: Rating changes defined at the modifier level, making adistinction between +/.Source: Fitch.

(No.)

Fitch Developed Markets International

Public Finance Rating Activity a

0

2

4

6

8

10

12

14

2003 2004 2005 2006 2007 2008 2009

No. of Upgrades No. of Downgrades

aCompares beginning-of-year rating with end-of-year rating; doesnot count multiple rating actions throughout the year.Note: Rating changes defined at the modifier level, making adistinction between +/.Source: Fitch.

(No.)

Fitch Emerging Markets International

Public Finance Rating Activity a

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By market type, advanced economies accounted for 70% of all outstanding Fitch-rated international public finance entities in 2009, and emerging market issuers forthe remaining 30%. Although downgrade activity was split evenly in 2009 between

the two major market types, with four each, the share of emerging market issuersaffected by downgrades, 7%, topped the 3% share of developed markets issuersdowngraded. The global recessions impact on emerging economies occurred wellafter advanced economies were deeply entrenched in the downturn; however,emerging market issuers also received all five of the international public financeupgrades in 2009.

Geographically, Europe not only accounted for the preponderance of assignedinternational public finance ratings, but also for all rating actions in 2009. Westernand Eastern Europe split downgrades with a total of four each, while the easternhalf of Europe alone captured all five upgrades for the year. Ukraine recorded themost downgrades with three, the result of the countrys sovereign downgrade inNovember; the cities of Kyiv, Odessa, and Kharkov received downgrades to B from B+. On the upside, two Turkish issuers, the Metropolitan Municipality of Istanbul and Toplu Konut Idaresi Baskanligi moved up the rating scale to BB+ fromBB , again on a sovereign rating action, this time the upgrade for Turkey (BB+).

Fitch registered no international public finance defaults in 2009, repeating 2008results. Fitch recorded an average annual default rate for international publicfinance issuers of 0.74% over the 1995 2009 period.

Fitch 2009 International Public Finance Rating TransitionRatesThe international public finance 2009 one-year rating migration table below pinpointsthe movement of ratings across the major rating categories (e.g. from A to BBB), asopposed to the modifier level, which counts each notch change (e.g. from A to A )

Fitch International Public Finance One-Year Transition Rates 2009

AAA AA A BBB BB B CCC to C D TotalAAA 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 97.14 2.86 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 100.00B 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Source: Fitch.

Fitch International Public Finance Average Annual Transition Rates 1995 2009

AAA AA A BBB BB B CCC to C D TotalAAA 98.45 1.55 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 1.38 97.47 1.15 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 1.19 97.62 1.19 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 8.45 87.32 4.23 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 3.16 88.42 2.11 6.32 0.00 100.00B 0.00 0.00 0.00 0.00 18.52 70.37 7.41 3.70 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 11.11 69.44 19.44 100.00

Source: Fitch.

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(Please see the Fitch International public finance Transition Rates at the modifier levelin the Appendix on page 11). The vertical left-hand column identifies ratingsoutstanding at the beginning of 2009, while the horizontal axis offers information on

the migration pattern of those ratings by years end. The diagonal, beginning withAAA at 100.00% and followed by AA at 100.00%, shows the relative stability of eachrating category.

It is important to note that relative to Fitchs universe of corporate or structuredfinance ratings, the number of international public finance observations by rating isrelatively small, and therefore upgrades or downgrades of just a few issuers can have alarge effect on the transition results.

For this report, international public finance local currency transition rates are alsoincluded for reference (available in the Appendix on page 13). The local currencyinternational rating measures the likelihood of repayment in the currency of thejurisdiction in which the issuer is domiciled and hence does not take account of thepossibility that it will not be possible to convert local currency into foreign currency, or

make transfers between sovereign jurisdictions transfer and convertibility risk. Assuch, examining local currency transitions at the major rating categories displays ratingmovements comparable to those previously examined at the long term issuer level.

Fitch International Public Finance Default RatesFitch-rated international public finance issuers recorded no defaults in 2009.

Over the course of Fitchs coverageof international public finance,originating in the mid-1990s, Fitchhas recorded a total of nine defaults.Similar to sovereigns, most defaultsinvolve a missed interest payment.

For the full list of defaults and eventdetails, please see Fitch-RatedInternational Public Finance Defaultson page 6.

Fitch has recorded an average annualdefault rate of 0.74% across itsuniverse of international publicfinance issuers. The average annualdefault rate is zero across Fitchsinvestment-grade internationalpublic finance ratings, while acrossnon-investment grade issuers Fitchhas recorded an average annualdefault rate of 4.52%. A view of thecomplete series of default rates fromone- to five-year periods and nowincluding the 10-year at the major rating categories is available in the AverageCumulative Default Rates 1995 2009 table on page 6.

Additionally, the Appendix provides default rates for international public finance localcurrency ratings (page 12). That said, Fitch has recorded only two local currencydefaults: Argentinas City of Buenos Aires in 2002 and Italys City of Taranto in 2007. Asa result, Fitchs long-term average annual default rate recorded across Fitch-ratedlocal currency international public finance ratings was 0.28% over the period 1995 2009

Fitch International Public FinanceDefault Rates

Number of Fitch-Rated Defaults Default Rate (%)

1995 0 0.001996 0 0.001997 0 0.001998 2 8.331999 0 0.002000 0 0.002001 0 0.002002 6 8.222003 0 0.002004 0 0.002005 0 0.002006 0 0.002007 1 0.672008 0 0.002009 0 0.00

Note: Data enhancement efforts may lead to slightly differentresults than previously published. Current study supersedes all

prior statistics.Source: Fitch.

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Fitch Transition and Default Methodology All Fitch global, publicly rated, international public finance long-term issuer foreigncurrency ratings from 1995 to the present are included in Fitchs transition and defaultstatistics, which include nearly 1,200 data points over the past 15 years. Fitch employs astatic pool approach in calculating default and transition data. The static pools, orcohorts, are created by grouping issuer ratings according to the year in which the ratingsare active and outstanding at the beginning of the year. For example, issuers with ratingsoutstanding at the beginning of 1995 constitute the 1995 static pool or cohort, with thesame true for the 1996, 1997 and additional cohorts. Issuers newly rated by Fitch in anygiven year are included in the following years cohort. For example, the performance of ratings initiated in mid-1995 would be followed as part of the 1996 and future cohorts.Ratings withdrawn mid-year are excluded from subsequent cohorts since they are nolonger active.

Param eters of the FitchInternational PublicFinance Default Rate

Statistical data captured in thisstudy is based on worldwide

publicly rated international publicfinance long-term issuer ratings. Short-term issuer and local

currency ratings were excludedfrom this calculation.

The restrictive default (RD) ratingis a default and counted as such.

One-year default rates werecalculated by dividing the numberof defaulted issuers by the numberof outstanding rated issuers at thebeginning of each respective year.

Fitch International Public Finance Ratings Average CumulativeDefault Rates: 1995 2009(%)

One-Year Two-Year Three-Year Four-Year F ive-Year 10-YearAAA 0.00 0.00 0.00 0.00 0.00 0.00AA 0.00 0.00 0.00 0.00 0.00 0.00A 0.00 0.00 0.00 0.00 0.00 0.00BBB 0.00 0.00 0.00 0.00 0.00 0.00BB 0.00 4.55 11.11 16.22 20.00 50.00B 3.39 7.84 11.90 19.35 28.00 55.56CCC to C 16.67 16.67 16.67 14.63 14.63 0.00

Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00Non-Investment Grade 4.52 8.81 13.18 16.51 19.79 29.63All International Public

Finance 0.74 1.38 2.04 2.64 3.42 5.63

Source: Fitch.

Fitch-Rated Interna tional Public Finance D efaults

Republic of Sakha (Yakutia): The republic defaulted on domestic bonds, August 1998.

City of Odessa : The city of Odessa failed to repay its UAH61 million municipal bond andinterest (UAH30 million), June 1998.

City of Buenos Aires : The city missed an interest payment on its euro medium-term noteprogram (EMTNs), May 2002.

Province of Buenos Aires: The province defaulted on debt-service payments of its EMTNs inthe amount of USD25.5 million, January 2002.

Province of Santiago del Estero: The province defaulted on debt-service payments due onprovincial consolidated debt, February 2002.

Province of Tucuman: The province defaulted on debt-service payments due on provincialconsolidated debt, February 2002.

Province of Mendoza : The province missed a bond interest payment of USD12.5 million,March 2002.

Province of San Juan: The province missed a bond interest payment of USD5.035 million onits 13.25% federally guaranteed bonds, July 2002.

City of Taranto : The city missed a debt installment repayment, January 2007.

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Transition RatesIn order to calculate one-year transition rates, Fitch examines the performance of ratingsoutstanding at the beginning and end of a calendar year. Withdrawn ratings are excluded

from the transition table calculations since they do not fit this criteria; namely, theratings be outstanding over a full year or over the full period under observation.

Issuer ratings may reside in multiple static pools as long as their ratings are outstandingat the beginning and end of the year or multiple-year horizons under observation. Forexample, the annual performance of an issuer rating initiated in 1994, thereforeoutstanding at the beginning of 1995, and withdrawn in 1999 would be included in the1995, 1996, 1997, and 1998 static pools. The ratings performance over multiple-yearhorizons would also be included in the two-year, three-year, and four-year transitionrates for each of the cohorts noted, but excluded from five-year transition rates sincethe rating was withdrawn in year five and was not outstanding for five full years as partof any cohort. (In other words, as part of the 1995 cohort, this ratings performancewould be monitored over a one-year period, 1995; two-year period, 1995 1996; three-

year period, 1995

1997; and four-year period, 1995

1998.) In all, Fitchs internationalpublic finance transition data contain 15 static pools or cohorts from 1995 2009,allowing for 15 unique one-year transition rates, 14 two-year transition rates, 13 three-year transition rates and so on.

The rating transitions outlined in this study represent a distinct historical period andmay not represent future rating migration patterns. Transition rates are influenced by anumber of factors, including macroeconomic variables and credit conditions. Thestatistics presented herein document the performance of Fitch-rated internationalpublic finance obligors. It is useful to examine the performance of Fitchs ratings on arelative scale, within each rating category. In addition, it is important to point out thatwhile transition matrices are presented at both the modifier and flat levels in this study,all other statistical analysis was conducted at the modifier level, unless notedotherwise.

Default RatesFitchs default rates are calculated on an issuer basis, as opposed to dollar amounts.First, defaults are examined by year for each static pool and individual rating category.For example, if 25 issuers defaulted in 2002 and the 2002 static pool consisted of 2,000issuer ratings, the resulting annual default rate for all ratings in 2002 would be 1.3%. If 10 of these defaults consisted of defaults among issuers rated BB at the beginning of the year and the BB cohort at the beginning of the year totaled 500, the BB 2002default rate would be 2% (10/500).

From these annual default rates, Fitch derives average annual default rates by weighingeach cohorts default rates by the number of ratings outstanding in the given cohortrelative to the number of total ratings outstanding for all cohorts. In other words,following the example above, the 2002 BB annual default rate of 2% might be followedby a 2003 BB annual default rate of 1%. A straight average of these two rates wouldignore potential differences in the size of the two cohorts. Rather, weighing the resultsbased on the relative number of BB ratings outstanding in 2002 and 2003 gives greateremphasis to the results of the BB cohort with the most observations.

The same technique is used to calculate average default rates over multiple-yearhorizons. For example, the two-year default rate for the 2002 BB rating pool would beaveraged with the two-year default rate for the 2003 BB rating pool by weighing thedefault rates by the relative size of each pool.

Fitchs Definition of Default

Fitch defines a default as one of the following: Failure of an obligor to make

timely payment of principaland/or interest undercontractual terms of anyfinancial obligation.

The distressed or othercoercive exchange of anobligation, where creditorswere offered securities withdiminished structural oreconomic terms comparedwith the existing obligation.

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For instance, any defaults produced by the 2002 BB cohort (the static pool) over thetwo-year time horizon are summed and divided by the number of BB ratingsoutstanding at the beginning of 2002 to arrive at the simple 2002 two-year cumulative

default rates (CDR) for the BB category. If a total of 15 issuers carrying BB ratings atthe beginning of 2002 default over the subsequent two years and 250 issuers were ratedBB at the beginning of 2002, 6% would be the resulting two-year CDR for the BBrating category, if 10 issuers defaulted in year one and five in year two. The 2002 two-year BB default rate would then be averaged with the 2003 two-year BB default rate(using the same methodology just described) by weighing the results of the two by therelative number of BB ratings outstanding in 2002 and 2003. This is the generalapproach for calculating average cumulative default rates over multiple-year horizons.

Withdrawn RatingsWith regard to withdrawn ratings, all public international public finance long-termissuer ratings are included in the static pool data until the ratings are withdrawn andare then excluded from future static pools.

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Appendix

Fitch International Public Finance Average Cumulative Default Rates: 1995 2009(%, Modifier Level)

One-Year Two-Year Three-Year Four-Year Five-Year 10-YearAAA 0.00 0.00 0.00 0.00 0.00 0.00AA+ 0.00 0.00 0.00 0.00 0.00 0.00AA 0.00 0.00 0.00 0.00 0.00 0.00AA 0.00 0.00 0.00 0.00 0.00 0.00A+ 0.00 0.00 0.00 0.00 0.00 0.00A 0.00 0.00 0.00 0.00 0.00 0.00A 0.00 0.00 0.00 0.00 0.00 0.00BBB+ 0.00 0.00 0.00 0.00 0.00 0.00BBB 0.00 0.00 0.00 0.00 0.00 0.00BBB 0.00 0.00 0.00 0.00 0.00 0.00BB+ 0.00 0.00 0.00 0.00 0.00 0.00BB 0.00 4.76 18.75 30.77 40.00 75.00BB 0.00 6.45 10.53 12.50 15.38 0.00

B+ 5.71 6.90 8.33 12.50 16.67 40.00B 0.00 10.53 20.00 33.33 45.45 75.00B 0.00 0.00 0.00 0.00 0.00 0.00CCC to C 16.67 16.67 16.67 14.63 14.63 0.00

Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00Non-Investment Grade 4.52 8.81 13.18 16.51 19.79 29.63All International Public

Finance 0.74 1.38 2.04 2.64 3.42 5.63

Source: Fitch.

Fitch International Public Finance Three-Year Default Statistics(%)

Ten-Year Average of Three-Year Cumulative Default Rates (CDRs) Major Rating Categories

AAA AA A BBB BB B19982007 0.00 0.00 0.00 0.00 11.11 11.90

Most Recent Three-Year Cumulative Default Rates (CDRs)AAA AA A BBB BB B

2007 0.00 0.00 0.00 0.00 0.00 0.002006 0.00 0.00 0.00 0.00 0.00 0.00

Ten-Year Average of Three-Year Cumulative Default Rates (CDRs) ModifierAAA AA+ AA AA- A+ A A BBB+ BBB BBB BB+ BB BB B+ B

1998 2007 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 18.75 10.53 8.33 20.00 0.00

Most Recent Three-Year Cumulative Default Rates (CDRs)AAA AA+ AA AA- A+ A A BBB+ BBB BBB BB+ BB BB B+ B

2007 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.002006 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Source: Fitch.

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Fitch International Public Finance One-Year Transition Rates: 2009(%)

AAA AA A BBB BB B CCC to C D ToAAA 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 97.14 2.86 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 100.00B 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Fitch International Public Finance Transition Rates: 1995 2009Average AnnualAAA 98.45 1.55 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 1.38 97.47 1.15 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 1.19 97.62 1.19 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 8.45 87.32 4.23 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 3.16 88.42 2.11 6.32 0.00 100.00B 0.00 0.00 0.00 0.00 18.52 70.37 7.41 3.70 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 11.11 69.44 19.44 100.00

Average Two-YearAAA 96.48 3.52 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 3.32 94.18 2.49 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 3.13 94.53 2.34 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 16.67 74.07 9.26 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 9.52 74.60 3.17 7.94 4.76 100.00B 0.00 0.00 0.00 0.00 30.43 52.17 8.70 8.70 100.00CCC to C 0.00 0.00 0.00 0.00 6.45 19.35 51.61 22.58 100.00

Average Three-YearAAA 94.33 5.67 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 5.76 90.17 4.07 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 4.40 93.41 2.20 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 28.57 61.90 9.52 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 15.91 63.64 2.27 6.82 11.36 100.00B 0.00 0.00 0.00 2.63 36.84 34.21 13.16 13.16 100.00CCC to C 0.00 0.00 0.00 0.00 18.52 25.93 29.63 25.93 100.00

Average Four-YearAAA 92.63 7.37 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 7.76 86.64 5.60 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 6.06 92.42 1.52 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 34.38 56.25 9.38 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 16.67 58.33 5.56 2.78 16.67 100.00B 0.00 0.00 0.00 7.41 40.74 18.52 11.11 22.22 100.00CCC to C 0.00 0.00 0.00 4.00 28.00 24.00 20.00 24.00 100.00

Average Five-YearAAA 90.43 9.57 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 10.17 83.05 6.78 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 8.00 90.00 2.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 39.13 47.83 13.04 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 17.24 58.62 3.45 0.00 20.69 100.00B 0.00 0.00 0.00 10.00 40.00 10.00 5.00 35.00 100.00CCC to C 0.00 0.00 0.00 12.50 29.17 20.83 12.50 25.00 100.00

Average 10-YearAAA 66.07 33.93 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 25.71 71.43 2.86 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 33.33 58.33 8.33 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 44.44 22.22 33.33 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 20.00 20.00 0.00 0.00 60.00 100.00B 0.00 0.00 0.00 0.00 0.00 16.67 0.00 83.33 100.00CCC to C 0.00 0.00 0.00 57.14 42.86 0.00 0.00 0.00 100.00

Source: Fitch.

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Fitch International Public Finance One-Year Transition Rates: 2009(%, Modifier Level)

AAA AA+ AA AA A+ A A BBB+ BBB BBB BB+ BB BB B+ B B CCCto C D Tot

AAA 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA+ 0.00 92.31 7.69 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 0.00 95.65 4.35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 0.00 0.00 100.00 0.00 0.00 0 .00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 100.00A+ 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 0.00 0.00 91.67 8.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 0.00 0.00 0.00 88.89 0.00 0.00 11.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 100.00BBB+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 80.00 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 14.29 85.71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 100.00BB+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 12.50 87.50 0.00 0.00 0.00 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 0.00 0.00 0.00 16.67 8.33 75.00 0.00 0.00 0.00 0.00 0 .00 100.00B+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 40.00 0.00 60.00 0.00 0.00 100.00B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 100.00B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00CCC to C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Fitch International Public Finance Transition Rates: 1995 2009 (%, Modifier Level )

Average Annual AAA 98.45 0.93 0.31 0.31 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA+ 7.89 90.79 1.32 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 4.73 87.84 7.43 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 0.00 4.76 92.86 1.90 0.00 0.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A+ 0.00 0.00 0.00 2.41 93.98 3.61 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 0.00 6.25 85.42 8.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 0.00 0.00 10.81 83.78 2.70 0.00 2.70 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 100.00BBB+ 0.00 0.00 0.00 0.00 0.00 0.00 26.09 69.57 4.35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15.38 80.77 3.85 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 22.73 63.64 13.64 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BB+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13.04 73.91 4.35 0.00 0.00 0.00 0.00 8.70 0.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 17.24 72.41 3.45 0.00 0.00 0.00 6.90 0.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 0.00 0.00 0.00 9.30 16.28 65.12 2.33 2.33 0.00 4.65 0 .00 100.00B+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.03 24.24 54.55 0.00 9.09 3.03 6.06 100.00B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.56 11.11 66.67 0.00 16.67 0.00 100.00B 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 33.33 66.67 0.00 0 .00 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 8.33 2.78 0.00 69.44 19.44 100.00

Average Three-YearAAA 94.33 3.64 0.81 1.21 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA+ 33.33 64.71 1.96 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 17.17 65.66 17.17 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 1.38 14.48 75.86 7.59 0.00 0.69 0.00 0.00 0.00 0.00 0 .00 0 .00 0.00 0.00 0.00 0.00 0.00 100.00A+ 0.00 0.00 0.00 8.16 77.55 10.20 4.08 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 0.00 36.36 36.36 27.27 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 0 .00 5.00 35.00 50.00 5.00 0.00 5.00 0.00 0 .00 0 .00 0.00 0.00 0.00 0.00 0.00 100.00BBB+ 0.00 0.00 0.00 0.00 0.00 12.50 62.50 18.75 6.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 42.86 42.86 0.00 14.29 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 8.33 66.67 8.33 8.33 8.33 0.00 0.00 0.00 0.00 0.00 0.00 100.00BB+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00 10.00 10.00 30.00 20.00 0.00 0.00 0.00 0.00 20.00 0.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13.33 46.67 13.33 0.00 0.00 0.00 0.00 6.67 20.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.26 5.26 10.53 31.58 31.58 0.00 5.26 0.00 0.00 10.53 100.00B+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.76 0.00 19.05 23.81 19.05 0.00 9.52 14.29 9.52 100.00B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.14 14.29 14.29 7.14 21.43 0.00 14.29 21.43 100.00B 0.00 0.00 0.00 0 .00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0 .00 0 .00 0.00 100.00 0.00 0.00 0.00 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.41 0.00 11.11 22.22 3.70 0.00 29.63 25.93 100.00

Continued on next page.Source: Fitch.

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Fitch International Public Finance Transition Rates: 1995 2009 (Continued)(%, Modifier Level)

AAA AA+ AA AA A+ A A BBB+ BBB BBB BB+ BB BB B+ B B CCCto C D Tot

Average 10-Year AAA 66.07 23.21 5.36 5.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA+ 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 33.33 50.00 5.56 11.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 21.43 14.29 57.14 7.14 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A+ 0.00 0.00 0.00 40.00 60.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 0.00 50.00 0.00 0.00 25.00 0.00 0.00 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB+ 0.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 66.67 0.00 0.00 33.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00BB+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 50.00 0.00 0.00 0.00 50.00 0.00 0.00 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 100.00BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00B+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 33.33 0.00 0.00 0.00 66.67 100.00B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 100.00B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00CCC to C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 14.29 42.86 0.00 0.00 42.86 0.00 0.00 0.00 0.00 0.00 0.00 100.00

Source: Fitch.

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Fitch International Public Finance Local Currency Ratings Average Cumulative Default Rates: 1995 2009(%)

One-Year Two-Year Three-Year Fou r-Year Five-YearAAA 0.00 0.00 0.00 0.00 0.00AA 0.00 0.00 0.00 0.00 0.00A 0.00 0.00 0.00 0.00 0.00BBB 0.00 0.00 0.00 0.00 0.00BB 1.22 1.89 3.03 3.85 5.00B 0.00 0.00 0.00 0.00 0.00CCC to C 25.00 25.00 25.00 0.00 0.00

Investment Grade 0.00 0.00 0.00 0.00 0.00Non-Investment Grade 1.64 2.35 3.51 2.50 3.33All International Public Finance 0.28 0.37 0.52 0.40 0.64

Source: Fitch.

Fitch International Public Finance Local Currency Ratings Transition Rates(%)

AAA AA A BBB BB BCCCto C D Tota

One-Year: 2009AAA 91.30 8.70 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 0.00 96.88 3.13 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 100.00BB 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 100.00B 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Average Annual: 1995 2009AAA 95.92 4.08 0.00 0.00 0.00 0.00 0.00 0.00 100.00AA 1.61 97.11 1.29 0.00 0.00 0.00 0.00 0.00 100.00A 0.00 1.71 96.58 1.71 0.00 0.00 0.00 0.00 100.00BBB 0.00 0.00 2.86 95.71 0.00 1.43 0.00 0.00 100.00BB 0.00 0.00 0.00 3.85 93.59 1.28 0.00 1.28 100.00B 0.00 0.00 0.00 0.00 24.24 75.76 0.00 0.00 100.00CCC to C 0.00 0.00 0.00 0.00 0.00 50.00 25.00 25.00 100.00

Source: Fitch.

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Fitch Ratings International Public Finance 2009 Transition and Default Study March 26 2010

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMIAND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLSITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THAT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIAAND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OSITE.Copyright 2010 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries. One State Street Plaza, NY, NY 10004.Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited exceptby permission. All rights reserved. All of the information contained herein is based on information obtained from issuers,other obligors, underwriters, and other sources which Fitch believes to be reliable. Fitch does not audit or verify the truthor accuracy of any such information. As a result, the information in this report is provided as is without anyrepresentation or warranty of any kind. A Fitch rating is an opinion as to the creditworthiness of a security. The rating doesnot address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engagedin the offer or sale of any security. A report providing a Fitch rating is neither a prospectus nor a substitute for theinformation assembled, verified and presented to investors by the issuer and its agents in connection with the sale of thesecurities. Ratings may be changed, suspended, or withdrawn at anytime for any reason in the sole discretion of Fitch.Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security.Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers,guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from USD1,000 to USD750,000(or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by aparticular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees areexpected to vary from USD10,000 to USD1,500,000 (or the applicable currency equivalent). The assignment, publication, ordissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with anyregistration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of GreatBritain, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing anddistribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.

Fitch-Rated International Public Finance Defaults a: 1995 2009

Issuer Name Rating at Beginning of Year Country Region

1998 Odessa, City of B+ b Ukraine EuropeSakha (Yakutia), Republic of B+ b Russian Federation Europe

2002Buenos Aires, City of CCC Argentina Latin AmericaBuenos Aires, Province of CC Argentina Latin AmericaMendoza, Province of CC Argentina Latin AmericaSan Juan, Province of CC Argentina Latin AmericaSantiago del Estero, Province

of CC Argentina Latin AmericaTucuman, Province of CC Argentina Latin America

2007Taranto, City of C Italy Europe

aRated by Fitch at the beginning of the year in which they defaulted. bInitial rating in year of default.Source: Fitch.

6 Int 0326

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