Oct. 26 (Bloomberg) -- Connecticut Attorney General Richard Blumenthal is probing Standard & Poor's, Moody's Investors Service and Fitch Ratings for strong-arming debt issuers into giving them business.

Blumenthal's office is investigating complaints that the credit-ratings companies rank debt against issuers' wishes, then demand payment, he said today. The state also is probing whether the companies threaten to downgrade debt unless they're awarded business to rate all of an issuer's securities, and the practice of offering ratings discounts in return for exclusive contracts.

``We've received credible reports that these practices exist,'' Blumenthal said in an interview. ``We've received a number of complaints both in Connecticut and elsewhere.''

Connecticut's investigation extends scrutiny of ratings companies beyond their assessments of subprime mortgages. The U.S. Securities and Exchange Commission and the states of New York and Ohio are probing whether S&P, Fitch and Moody's gave excessively high rankings to debt that soon tumbled in value.

``My investigation seeks to determine whether credit rating agencies may be exploiting their dominant positions to unfairly raise prices or exclude competitors,'' Blumenthal said in an e- mailed statement.

Received Subpoena

McGraw-Hill Cos., parent of S&P, said in a regulatory filing today it received a subpoena on Oct. 16. McGraw-Hill spokesman Steven Weiss declined to comment beyond the filing.

Fitch spokesman James Jockle confirmed the company was also asked for information. Moody's spokesman Anthony Mirenda declined to comment. ``In light of recent developments in the marketplace we expect to receive requests from several entities,'' Mirenda said.

``Ratings definitely do not mean what they used to and, to some investors, they mean almost nothing now,'' said Joseph R. Mason, an associate finance professor at Drexel University in Philadelphia, and a visiting scholar at the Federal Deposit Insurance Corp. and a senior fellow at the University of Pennsylvania's Wharton School of Business.

New York-based McGraw-Hill, which also owns BusinessWeek magazine and market researcher J.D. Power & Associates, rose 50 cents to $49.75 in New York Stock Exchange composite trading. Moody's parent, New York-based Moody's Corp., gained 6 cents to $43.39.

Credit Market Slump

A slump in credit markets after the collapse of subprime mortgage bonds prompted criticism from investors and lawmakers, who say the companies gave excessively high rankings to securities that later lost more than half their value. That criticism of ratings companies escalated after defaults on subprime mortgages roiled global fixed-income markets, when two hedge funds managed by Bear Stearns Cos. went bankrupt.

S&P, Moody's and Fitch began mass downgrades of the bonds only after some of them had fallen as much as 80 cents on the dollar.

SEC Chairman Christopher Cox last month said the commission is probing whether Wall Street pressured ratings companies to give top rankings for mortgage bonds.

Ohio's probe is progressing, said Jennifer Brindisi, a spokeswoman for that state's attorney general, Marc Dann. Investigators have talked with officials from other states, including Connecticut, she said. Brindisi said she couldn't identify the targets.

In the interview, Blumenthal didn't describe specific incidents involving the companies.

``These are very serious allegations, including the ratings agencies threatening issuers that have to pay to play,'' Blumenthal said. ``They have to pay to play because they have to either pay for the rating or pay more for a more favorable rating.''

To contact the reporters on this story: Sarah Rabil in New York at srabil@bloomberg.net; Mark Pittman in New York at mpittman@bloomberg.net

Last Updated: October 26, 2007 16:40 EDT