Bloomberg News

Moody’s Profit Falls as European Crisis Chills Bond Offerings

October 27, 2011

Oct. 27 (Bloomberg) -- Moody’s Corp., the world’s second- largest provider of credit ratings, said quarterly profit fell 4 percent as companies around the world postponed bond sales.

Net income dropped to $130.7 million, or 57 cents a share, from $136 million, or 58 cents, a year earlier, New York-based Moody’s said today in a statement distributed by Business Wire. The average forecast of three analysts in a Bloomberg survey was for earnings of 48 cents. Chief Executive Officer Ray McDaniel said in the statement that Moody’s earnings per share for the year would likely be at the “upper end” of $2.38 to $2.48.

Demand for credit ratings dropped as Europe’s struggle to prevent the Greek debt crisis from spilling into Italy and Spain, a battle that led to higher borrowing costs and fewer debt offerings globally. About 39 percent of Moody’s revenue last year came from the fees that companies, cities and countries paid to have their bond offerings evaluated, according to data compiled by Bloomberg.

“The bond business died in the third quarter,” Ed Atorino, an analyst at Benchmark Co. in New York, said in an interview before Moody’s announced its results. “Europe is frozen. They could have a tough few months here on the rating side.”

Moody’s said revenue increased 4 percent to $531.3 million for the quarter.

Corporate bond issuance from the U.S. to Europe to Asia fell 37 percent to $566.5 billion in the quarter ended Sept. 30 from $894.4 billion in the same period of 2010, Bloomberg data show. Sales of residential mortgage-backed securities plummeted 60 percent in the U.S. last quarter, McGraw-Hill Cos. said last week in a regulatory filing. The company also rates those securities.

Moody’s dropped 19 percent from its peak this year of $41.75 on June 9. The stock closed at $33.67 yesterday.

Revenue at Standard & Poor’s, the largest credit-ratings company, fell 1.8 percent to $409.9 million in the third quarter, the New York-based unit of McGraw-Hill announced last week.

(Moody’s will hold a conference call for analysts and investors at 11:30 a.m. New York time. To listen, access the company’s website at {ir.moodys.com})

--Editors: Sharon L. Lynch, Alan Goldstein

To contact the reporter on this story: Zeke Faux in New York at zfaux@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.


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