Moody’s

110810_moodys_ap_605Moody’s Corp. doesn’t often give away its thoughts free of charge. But the ratings firm made an exception recently, issuing an unsolicited credit rating to National Penn Bancshares Inc., a small community bank it had never assessed before. Moody’s grade was lower than one issued just weeks earlier by Kroll Bond Rating Agency Inc., which the bank had hired to rate a new bond. Kroll contends Moody’s deliberately lowballed its rating—a move that could have ripple effects through the market for National Penn’s bonds—to scare other small banks into hiring it for future deals. “It seems this was nothing less than intimidation,” said Kroll President Jim Nadler. “Investors and issuers are worried that Moody’s, if it’s not paid their ransom, will continue doing this until they bully their way into the market.” A Moody’s spokesman said the firm’s unsolicited rating for National Penn was due to the relatively large size of the debt deal for a regional bank. “We thought our opinion would be helpful to market participants,” he said. [WSJ]

  • 22 Sep 2014 at 5:55 PM

Fitch, Moody’s Still More Patriotic Than S&P

Neither are going to make that double-A-plus mistake that a certain ratings agency made, and while they’re at it, they have some kisses to blow in Washington’s direction. Read more »

  • 30 Jun 2014 at 5:22 PM

(Technical) Default Watch ’14: Argentina

Today’s the big day for the uniquely recalcitrant debtor’s second big D in 13 years, now that its least favorite jurist has reiterated once again that, its best efforts not withstanding, it isn’t allowed to pay only the creditors it wants to pay while piously promising to “meet its obligations, pay off its debts and honor its commitments,” except maybe to these vulture usurers “trying to bring us down to our knees.” Well, maybe not the big day, since failure to pay today—and U.S. District Judge Thomas Griesa made very clear that the “illegal” payment “will not be made,” or he’s gonna start holding people in contempt—amounts to a mere “technical” or “selective” default for 30 days. Then, maybe Moody’s will do something about it. Read more »

Even a ratings agency can see that a $400 million loss, some impending arrests and Mike Corbat’s heartache are not good for business. Read more »

Let’s say, for argument’s sake, that you are a member of a long-entrenched board of directors. Perhaps at a company that has been run (ineptly, perhaps) exclusively for the benefit of its ruling family. Then, disaster strikes, and someone—perhaps Carl Icahn, or Dan Loeb, or someone who used to work for Carl Icahn or Dan Loeb—notices just what a corporate governance and/or shareholder value nightmare you’re supposedly to be overseeing.

Now, let’s make the further assumption that all of the outrageous things the aforementioned activist(s) will say about you and the company to which you have a fiduciary duty are true. With that annual meeting coming up and a full slate of dissident director candidates eyeing your board fees, how will you ever convince the shareholders you’ve been screwing to keep you on?

Casting aspersions about the other guys probably won’t work, because, well, people who live in glass houses and all. And there isn’t enough time to make a few token moves to show that you’ve learned a thing or two from the ordeal—and even if there were time, well, you and the cronies just don’t feel like. And now those bastards at the proxy advisors are calling for your head.

Well, thanks to the infallible folks at Moody’s, you’ve now got a whole new argument to trot out: If Carl Icahn or Dan Loeb or one of their protégés take over, we’ll be downgraded, and then the activist trash who take over will have to pay way more to leverage the hell out of the company to pay themselves off, and will leave you the long-term shareholder holding the bag. And it won’t be my fucking problem anymore, because you’ll have kicked me out. So there. Read more »

The liquidators want $1 billion for investors and the name of the rating agencies’ dealer for a friend. Read more »

  • 23 Aug 2013 at 4:04 PM

Too Big To Fail Is Pretty Much Over, Says Moody’s

Yesterday Moody’s put the debt of four of the six big U.S. banks – GS, JPM, MS, and WFC – on review for downgrade, and the other two – C and BAC – on the amusing “review direction uncertain,”1 because Moody’s is becoming increasingly convinced that, if those banks blew up, the government would not bail out their holding company unsecured debt. Not entirely convinced – it’s just “consider[ing] reducing its government (or systemic) support assumptions to reflect the impact of US bank resolution policies” – but more convinced, anyway. More convinced than it was in March, when it announced “that it would reassess its support assumptions for bank holding companies in the US and that it would consider whether to revise these assumptions by the end of the year.”

It’s a boring cliché at this point to point out that credit ratings are a lagging-to-contrarian indicator, but still: Read more »

Retail clients are not typically paragons of rationality or possessors of Black-Scholes calculators so a good way to make money is to bamboozle them with mispriced derivatives. The classic way banks do this is with structured notes, where you combine a bond worth $75 and an S&P option or whatever worth $15 and sell the combination for $100 because who has time to check your math, really. In the early years of this century life insurance companies came up with a clever variation on this idea. The variation was:

  • Combine a bond worth $75 and an S&P put option worth $15.1
  • Sell the combination for like $80.
  • Hope everyone forgets about it.

This was an amazing plan. You can see why it sold well? You can also see why it did not really work, for the insurers? It totally totally did not work, for the insurers, and yesterday Moody’s issued a report about it saying basically “a lot of life insurers are kind of fucked because of this,” which, sure, but what were they expecting?

Here’s what they were expecting: Read more »