Moody’s Profit Increases as Bond Sales Boost Demand for Ratings

Moody’s Corp., owner of the second- largest credit ratings firm, said fourth-quarter profit increased 66 percent as companies took advantage of record investor demand and lower borrowing costs by issuing debt.

Net income climbed to $160.1 million from $96.2 million a year earlier, the New York-based company said today in a statement distributed by Business Wire. Profit excluding certain items was 73 cents per share, exceeding the average estimate of 71 cents in a Bloomberg survey of analysts.

Companies from the U.S. to Europe to Asia tapped debt markets at the fastest pace ever in the fourth quarter with worldwide corporate issuance at $998 billion, according to data compiled by Bloomberg. The Federal Reserve has held its target rate for overnight loans among banks between zero and 0.25 percent since December 2008 to spur economic growth after the longest recession since the 1930s.

Moody’s fell 7.7 percent to $43.37 in New York, the lowest level since Sept. 11. After trading at a five-year high, its shares fell as much as 11.7 percent Feb. 4 as the Justice Department filed a lawsuit against its competitor, Standard & Poor’s, a unit of McGraw-Hill Cos.

The suit claims the world’s largest credit rater deliberately understated the risk of bonds by mortgages made to the least creditworthy borrowers to win business from Wall Street banks.

“We don’t have any knowledge of any pending complaint by the Department of Justice raising similar claims against Moody’s,” Chief Executive Officer Ray McDaniel said today on an earnings call with analysts.

Moody’s said revenue rose 33 percent to $754.2 million for the quarter, from $567.1 million in the year-earlier period. Ratings from Moody’s Investors Service account for about 70 percent of the firm’s sales in 2011, according to data compiled by Bloomberg.

To contact the reporter on this story: Matt Robinson in New York at mrobinson55@bloomberg.net

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

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