EganJones Ratings Co'

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Egan-Jones Ratings Co.

• The Future of the Credit Rating Industry
• Credit Rating Agency Duopoly Relief Act of 2006
• PRMIA - Stanford
• Dec. 5, 2006

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Egan-Jones

• Timely, Accurate Calls
• Focused on Performance
• Focused on Adding Value

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Egan-Jones Ratings Company

• Founded in 1992
• Independent - not paid by Issuers
• Pure Research no Investment Banking, Money
  Management, or Trading
• Uniqueness constant trolling for financial
  change
• Forward looking, capturing investment
  opportunities
• Success with timely, accurate calls
• Fed Reserve, Stanford/Michigan Studies

Egan-Jones Ratings Co.
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Enron(flagged June 27, 2001, filed Dec. 7.
2001)

• Egan-Jones rated at B when SP was at BBB- and
  Moodys at Baa3
• Drop in coverage 2.81 for March 2000 to
  2.11 for March 2001
• California exposure, long telecom capacity,
  credibility
• Trading Business Needed High Credit Quality
• Comment on Fraud

Egan-Jones Ratings Co.
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WorldCom(flagged July 26, 2001, filed July 22,
2002 )

• Refrain Cannot fail because it generates
• positive cashflow
• Tough industry conditions Excess capacity
  Capital expenditures
• Cut in coverage 13.61 for March 2000 to
  8.81 for March 2001
• ICIX Acquisition (4 billion debt)
• Regional Bells
• Loss of Management Credibility 340 million
  loan, 50 billion
  intangibles

Egan-Jones Ratings Co.
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(No Transcript)
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Delphi(flagged Sept. 2001, filed Oct. 2005)

• Weak industry conditions
• Excess Capacity
• Dependence on GM
• No expected change
• Comment on Fraud

Egan-Jones Ratings Co.
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SP cuts BB to BB
EJR at B-
Moodys cuts Baa2 to Baa3
EJR cut to CCC
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Positive Call Nextel(flagged Nov. 2003,
acquired Aug. 2005)

• High incentives for consolidation
• Cashflow was becoming positive
• Rapid subscriber growth
• Declining debt
• Shift in technology (common platform)
• Egan-Jones at BBB- when Moodys at B2 (11/03)

Egan-Jones Ratings Co.
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PEW - Post Enron, WorldCom

• Two types of rating firms
• SP, Moodys and Fitch 90 of from
  Independents 0 from issuers
• Rise in Fiduciary Exposure
• Recognition of conflict
• No more monkey in the room defense
• Structural issues investment guidelines,
  indexes
• Big Bucks - 6 billion paid by IBs for Worldcom

Egan-Jones Ratings Co.
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Dealing with Coming Changes

• Regardless of SEC Actions
• Change Investment Guidelines
• Broaden Scope
• Protect from Fiduciary Exposure
• Call us for future movers

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Egan-Jones

• Timely, Accurate Calls
• Focused on Performance
• Focused on Adding Value