NEW YORK, July 15 Standard & Poor's on Thursday
cut its commercial paper rating on its rival Moody's Corp
(MCO.N) by one notch, saying business risk has increased with
passage of financial reform legislation by the U.S. Congress.
S&P cut Moody's commercial paper rating one notch to A-2,
the third highest ranking, from A-1.
"The legislation will likely result in a greater instance
of defending against litigation and other changes in operating
practices that will likely increase operating costs and thereby
reduce profitability and margins," S&P said in a statement.
Congress on Thursday approved the broadest overhaul of
financial rules since the Great Depression, which will tighten
regulations across the financial industry. For details, see
In particular, the reform measure changes pleading
standards so that investors may be able to sue a rating agency
if they can show it failed to investigate facts relied upon in
ratings or verify the facts from a third-party source.
"Moody's management has stated that it plans to adapt its
business practices in an effort to partially offset any
potential new litigation risks," S&P said.
"Nevertheless, we believe that Moody's will likely face
higher operating costs, lower margins, and increases in
litigation-related event risk that we believe may present risks
to the company's reputation," the rating agency said.
(Reporting by Dena Aubin and Karen Brettell; Editing by