Moody’s Corp. (MCO:US), the credit-ratings firm whose shares plunged after the U.S. sued competitor Standard & Poor’s, said its board had authorized repurchases of $1 billion of stock.
The program could be used to buy back shares after Moody’s exhausts its authority to repurchase stock under a previous plan, which allowed it to acquire $677 million as of Dec. 31, the New York-based company said yesterday in a statement distributed by Business Wire.
Moody’s (MCO:US), owner of the second-largest ratings firm, has tumbled 15 percent since S&P disclosed Feb. 4 a Justice Department lawsuit over the alleged conflicts of interest that led it to assign inflated grades to mortgage securities during the credit boom. The decline includes a gain to $46.96 in trading after the close of markets yesterday from $46.09 before the release of the statement.
“The company plans to repurchase shares systematically and opportunistically subject to available cash, market conditions and other ongoing capital allocation decisions,” Moody’s said in the statement. “As a result, the company’s share repurchase activity may vary from quarter to quarter.”
Moody’s, which had a market value of $11.22 billion on Dec. 31, said Feb. 8 that its fourth-quarter profit increased 66 percent to $160.1 million as companies took advantage of record investor demand and lower borrowing costs by issuing debt.
While its shares have slumped amid concern that it may also face new suits over its own mortgage-bond grades from the government or private investors, Chief Executive Officer Ray McDaniel said on an earnings call with analysts that Moody’s wasn’t aware of the U.S. preparing any action.
“We don’t have any knowledge of any pending complaint by the Department of Justice raising similar claims against Moody’s,” he said.
McDaniel had said on the call that Moody’s expected to conduct approximately $500 million of share repurchases this year, “subject to available cash, market conditions and other ongoing capital allocation decisions.” Those planned buybacks were “meant to substantially offset the impact of employee stock-based compensation plans,” he said.
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