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Moody's Corporation
Type	Public (NYSE: MCO)
Founded	New York City (1909)
Headquarters	New York City
Revenue	▲ US$2.04 billion (2006)
Operating income	▲ US$1.26 billion (2006)
Net income	▲ US$754 million (2006)
Website	www.moodys.com

Moody's Corporation (NYSE: MCO) is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. The company has a 40% share in the world credit rating market.

Moody's was founded in 1909 by John Moody. Top institutional owners of Moody's include Berkshire Hathaway and Davis Selected Advisers.

[edit] Moody's ratings

[edit] Long-term obligation ratings

Investment grade

Aaa

Moody judges obligations rated Aaa to be the highest quality,^[1] with the "smallest degree of risk".^[2]

Aa1, Aa2, Aa3

Moody judges obligations rated Aa to be high quality, with "very low credit risk",^[1] but "their susceptibility to long-term risks appears somewhat greater".^[2]

A1, A2, A3

Moody judges obligations rated A as "upper-medium grade", subject to "low credit risk",^[1] but that have elements "present that suggest a susceptibility to impairment over the long term".^[2]

Baa1, Baa2, Baa3

Moody judges obligations rated Baa to be "moderate credit risk".^[1] They are considered medium-grade and as such "protective elements may be lacking or may be characteristically unreliable".^[2]

Speculative grade (Also known as High Yield or 'Junk')

Ba1, Ba2, Ba3

Moody judges obligations rated Ba to have "questionable credit quality."^[2]

B1, B2, B3

Moody judges obligations rated B as speculative and "subject to high credit risk",^[1] and have "generally poor credit quality."^[2]

Caa1, Caa2, Caa3

Moody judges obligations rated Caa as of "poor standing and are subject to very high credit risk",^[1] and have "extremely poor credit quality. Such banks may be in default..."^[2]

Ca

Moody judges obligations rated Ca as "highly speculative"^[1] and are "usually in default on their deposit obligations".^[2]

C

Moody judges obligations rated C as "the lowest rated class of bonds and are typically in default,"^[1] and "potential recovery values are low".^[2]

Special

WR

Withdrawn Rating^[3]

NR

Not Rated^[3]

P

Provisional

[edit] Short-term taxable ratings

P-1: Moody judges Prime-1 rated issuers as having "a superior ability to repay short-term debt obligations".^[4]

P-2: Moody judges Prime-2 issuers as having "a strong ability to repay short-term debt obligations".^[4]

P-3: Moody judges Prime-3 rated issuers as having "an acceptable ability to repay short-term obligations".^[4]

NP: Moody considers "Not Prime" rated issuers as not falling "within any of the Prime rating categories".^[4]

Moody noted that "Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider."^[4]

[edit] Short-term tax-exempt ratings

Unlike S&P, Moody's has separate categories for short term municipal bonds. The ratings categories largely overlap, though, and have the same implications for the ability to repay short-term obligations.

[edit] Individual bank ratings

Moody's also rates each bank's financial strength.^[2] These ratings differ from deposit ratings in that they measure how likely the bank is to need assistance from third parties.

A: "superior intrinsic financial strength"^[5]

B: "strong intrinsic financial strength"^[5]

C: "adequate intrinsic financial strength"^[5]

D: "modest intrinsic financial strength, potentially requiring some outside support at times"^[5]^[2]

E: "very modest intrinsic financial strength, with a higher likelihood of periodic outside support"^[5]^[2]

[edit] Criticism

Credit rating agencies such as Moody's have been subject to criticism in the wake of large losses in the Asset backed security collateralized debt obligation (ABS CDO) market that occurred despite being assigned top ratings by the CRAs. For instance, losses on $340.7 million worth of ABS collateralized debt obligations (CDO) issued by Credit Suisse Group added up to about $125 million, despite being rated Aaa by Moody's.^[6]

[edit] Abusive business practices

Moody's has also been accused of "blackmail". In one example the German insurer Hannover Re was offered a "free rating" by Moody's. The insurer refused. Moody's continued with the "free ratings", but over time lowered its rating of the company. Still refusing Moody's services, Moody's lowered Hannover's debt to junk, and the company in just hours lost $175 million in market value. ^[7]

"As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression. A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings." ^[8]

[edit] Moody's Executive Officers

Raymond W. McDaniel Jr. - Chairman and Chief Executive Officer
Linda S. Huber - Executive Vice President and Chief Financial Officer
John J. Goggins - Senior Vice President and General Counsel
Jay McCabe - Senior Vice President and Corporate Controller
Perry Rotella - Senior Vice President and Chief Information Officer

[edit] References

^ ^a ^b ^c ^d ^e ^f ^g ^h "Moody's Rating Symbols & Definitions" (PDF). p. 8. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21.
^ ^a ^b ^c ^d ^e ^f ^g ^h ⁱ ^j ^k ^l Moodys. Rating Definitions Requires free registration. Retrieved 2008-10-06
^ ^a ^b "Moody's Rating Symbols & Definitions" (PDF). p. 5. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21. "Withdrawn - WR ... Not Rated - NR"
^ ^a ^b ^c ^d ^e "Moody's Rating Symbols & Definitions" (PDF). p. 10. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21.
^ ^a ^b ^c ^d ^e "Moody's Rating Symbols & Definitions" (PDF). p. 25. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21.
^ Tomlinson, Richard; Evans, David (2007-06-01), "CDOs mask huge subprime losses, abetted by credit rating agencies", International Herald Tribune, http://www.iht.com/articles/2007/05/31/bloomberg/bxinvest.php
^ Credit Raters' Power Leads to Abuses, Some Borrowers Say
^ How Moody's sold its ratings - and sold out investors

[edit] See also

[edit] External links

[MRSD8-0] ^ ^a ^b ^c ^d ^e ^f ^g ^h "Moody's Rating Symbols & Definitions" (PDF). p. 8. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21.

[moodys-1] ^ ^a ^b ^c ^d ^e ^f ^g ^h ⁱ ^j ^k ^l Moodys. Rating Definitions Requires free registration. Retrieved 2008-10-06

[MRSD-2] "Moody's Rating Symbols & Definitions" (PDF). p. 5. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21. "Withdrawn - WR ... Not Rated - NR"

[MRSD10-3] "Moody's Rating Symbols & Definitions" (PDF). p. 10. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21.

[MRSD25-4] "Moody's Rating Symbols & Definitions" (PDF). p. 25. http://v3.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRatingsSymbolsand%20Definitions.pdf. Retrieved 2009-09-21.

[cdo-5] Tomlinson, Richard; Evans, David (2007-06-01), "CDOs mask huge subprime losses, abetted by credit rating agencies", International Herald Tribune, http://www.iht.com/articles/2007/05/31/bloomberg/bxinvest.php

[6] Credit Raters' Power Leads to Abuses, Some Borrowers Say

[7] How Moody's sold its ratings - and sold out investors

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