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Moody's
From Wikipedia, the free encyclopedia
| Moody's Corporation | |
|---|---|
 |
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| Type | Public (NYSE: MCO) |
| Founded | New York City (1909) |
| Headquarters | New York City |
| 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.
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Moody's long-term obligation ratings are opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings reflect both the likelihood of default and the probability of a financial loss suffered in the event of default.
- Investment grade
- Aaa
- Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
- Aa1, Aa2, Aa3
- Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
- A1, A2, A3
- Obligations rated A are considered upper-medium grade and are subject to low credit risk.
- Baa1, Baa2, Baa3
- Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
- Speculative grade
- Ba1, Ba2, Ba3
- Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
- B1, B2, B3
- Obligations rated B are considered speculative and are subject to high credit risk.
- Caa1, Caa2, Caa3
- Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
- Ca
- Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
- C
- Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
- Special
- WR
- Withdrawn Rating
- NR
- Not Rated
- P
- Provisional
Moody's short-term ratings for taxable securities are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.
Moody's employs the following designations to indicate the relative repayment ability of rated issuers:
- P-1
- Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
- P-2
- Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
- P-3
- Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
- NP
- Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
- Note: 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.
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.
- See also: Credit rating agency#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.[1]
- ^ 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>