Moody's: Wikis


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Moody's Corporation
Type Public (NYSEMCO)
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)

Moody's Corporation (NYSEMCO) 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.


Moody's ratings


Long-term obligation ratings

Investment grade
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]
Moody judges obligations rated Ca as "highly speculative"[1] and are "usually in default on their deposit obligations".[2]
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]
Withdrawn Rating[3]
Not Rated[3]

Short-term taxable ratings

Moody judges Prime-1 rated issuers as having "a superior ability to repay short-term debt obligations".[4]
Moody judges Prime-2 issuers as having "a strong ability to repay short-term debt obligations".[4]
Moody judges Prime-3 rated issuers as having "an acceptable ability to repay short-term obligations".[4]
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]

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.

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.

"superior intrinsic financial strength"[5]
"strong intrinsic financial strength"[5]
"adequate intrinsic financial strength"[5]
"modest intrinsic financial strength, potentially requiring some outside support at times"[2][5]
"very modest intrinsic financial strength, with a higher likelihood of periodic outside support"[2][5]


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]

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]

Moody's Executive Officers [9]

  • 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
  • Lisa S. Westlake - Senior Vice President and Chief Human Resources Officer
  • Carlton Charles - Vice President, Treasurer
  • Robert Fauber - Senior Vice President, Corporate Development
  • Jeffrey Hare - Senior Vice President, Corporate Planning
  • Arthur Skelskie - Vice President, Corporate Services
  • Blair L. Worrall - Vice President, Internal Audit
  • Anthony Mirenda - Vice President, Global Communications
  • Liz Zale - Vice President, Investor Relations
  • Jane B. Clark - Corporate Secretary
  • Michael Kanef - Chief Regulatory and Compliance Officer

See also


External links


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