Moody's downgrades Ford to 'junk' status on weak outlook

NEW YORK - Moody's downgraded Ford's credit rating to speculative or "junk" status on Monday, citing the company's weak financial outlook as it embarks on an ambitious restructuring.

Characterizing the auto giant's current overhaul as "unprecedentedly large and challenging," the ratings agency slashed Ford's debt to the non-investment-grade "Ba1" -- saying prospects for its cash flow and profit margins through the 2020-2021 period were poor.

Ford's performance has eroded "during a period in which global automotive conditions have been fairly healthy," Moody's said. 

"Ford now faces the challenges of addressing these operational problems as demand in major markets is softening and as the auto industry is contending with an unprecedented pace of change relating to vehicle electrification, autonomous driving, ride sharing and increasingly burdensome emission regulations."

However, Ford "does have a sound balance sheet and liquidity position from which to operate," said Moody's senior vice president Bruce Clark.

The US automaker faces operational inefficiencies in all key regional markets, as well as a much-diminished outlook in China, which has seen profits sink from more than $1 billion in 2016 to a major loss, according to Moody's.

Ford has made progress in lowering costs in China but the outlook is still uncertain because of an "increasingly competitive" auto market and the country's weaker near-term growth rates, Moody's said.

Considerably better is the outlook in North America, where revamps of the lucrative F-series pickup trucks should boost operating projects.

Moody's said the company's alliance with Volkswagen held promise but that it will have only "minimal impact" on Ford's earnings and cash flow before 2022.

Shares of Ford fell 2.9 percent to $9.27 in after-hours trading.

source: news.abs-cbn.com

Moody's reaches USD864M settlement over subprime ratings

WASHINGTON - Ratings agency Moody's has agreed to pay nearly $864 million in a settlement with the US authorities over its inflated ratings of risky mortgage securities that contributed to prompting the 2008 global financial crisis, the Justice Department said Friday.

The agreement was signed between Moody's Investors Services, Moody's Analytics and parent company Moody's Corporation on one hand, and 21 states and the Justice Department on the other.

The authorities accused the credit rating agency of overvaluing the ratings of securities backed by subprime mortgages or at-risk loans at the center of the country's worst financial crisis since the Great Depression.

Standard and Poor's, a competing agency, agreed to pay a $1.37 billion fine in 2015 for deceiving investors about the quality of subprime mortgages.

The agreement follows an investigation lasting several years.

"Today’s settlement contains not only a significant penalty and factual admissions of its conduct, but also a commitment by Moody’s to new and continued compliance measures designed to ensure the integrity of credit ratings going forward," Principal Deputy Associate Attorney General Bill Baer said in a statement.

The Financial Crisis Inquiry Commission concluded in 2011 that "this crisis could not have happened without the rating agencies," which allowed the ongoing trading of bad debt.

Moody's is the second-largest rating agency after Standard and Poor's. Together with the third major agency, Fitch, the three ratings firms dominate the bond-rating market with a more than 96 percent share, compared to 98.8 percent in 2007 before the crisis, Bloomberg News reported.

source: news.abs-cbn.com

Moody's keep South Africa's credit rating unchanged

JOHANNESBURG - International credit rating firm Moody's has left South Africa's sovereign debt grading unchanged two notches above junk status, but warned Saturday of a possible future downgrade if reforms to support growth fail to materialize.

Moody's rates Africa's most developed economy as Baa2 -- meaning it is of investment grade for banks -- albeit with a negative outlook.

Instead of the much anticipated formal review of South Africa's credit rating, Moody's issued an updated credit opinion overnight, warning that the negative outlook remained because of political tensions and weak growth.

"The negative outlook on South Africa's Baa2 government bond rating reflects risks related to the implementation of structural reforms aimed at restoring confidence and encouraging investment," it said in a statement released early Saturday.

It added that the country's political scene continued to be "noisy" but that key institutions remained resilient.

One of the credit challenges for South Africa is "protracted political infighting that generates policy uncertainty and impedes structural reforms," it said.

On Friday, another international credit rating firm, Fitch, dropped its outlook for South Africa from stable to negative, citing the country's recent political turmoil under President Jacob Zuma.

Zuma has been engulfed by graft scandals and a power struggle with Finance Minister Pravin Gordhan, while economic growth has fallen to 0.5 percent and unemployment hit a 13-year high.

Moody's warned that South Africa's rating "would likely be downgraded in the absence of fundamental structural reforms supporting higher and sustainable medium term growth".

It also hinted that a rating upgrade was unlikely.

Standard & Poor's is expected to make its key announcement on South Africa's investment grading on December 2.

Like Fitch, S&P currently has South Africa rated at the lowest investment grade.

A junk rating by S&P could trigger a bond sell-off by foreign investors, as well as hiking Pretoria's borrowing costs.

source: news.abs-cbn.com

Merkel calls for sober EU divorce talks with "partner" Britain

BERLIN/HERMANNSWERDER - German Chancellor Angela Merkel called on Saturday for clear-headed negotiations with Britain on its departure from the European Union, stressing that talks with the "close partner" must take place in a good atmosphere.

Merkel's reasoned approach came despite a call from foreign ministers from the EU's six founding members for Britain to leave the bloc as soon as possible after Britons voted to quit in the biggest blow to the project since World War Two.

"The negotiations must take place in a businesslike, good climate," Merkel told a news conference after a meeting of her conservative party in Hermannswerder, outside Potsdam to the west of Berlin.

"Britain will remain a close partner, with which we are linked economically," she said, adding that there was no hurry for Britain to invoke Article 50 of the EU treaty -- the move it must make to set in motion the process to exit the bloc.

"Quite honestly, it should not take ages, that is true, but I would not fight now for a short time frame," Merkel said.

To the north of the German capital, the six foreign ministers struck a more urgent tone, pressing Britain to trigger the process for exiting the bloc after Britons voted by 52-48 percent to exit the EU, which it joined more than 40 years ago.

"We now expect the UK government to provide clarity and give effect to this decision as soon as possible," the ministers from Germany, France, Italy, the Netherlands, Belgium and Luxembourg said in a joint statement.

It is up to Britain to set in motion this process to exit the bloc.

In London, Matthew Elliott, chief executive of the Vote Leave campaign, said Britain should begin informal negotiations on a full settlement governing its post-Brexit relationship with the EU before invoking Article 50 of the Lisbon Treaty.

FRENCH PRESSURE

France pressed for a swift start to the exit process.

French Foreign Minister Jean-Marc Ayrault said the negotiations with Britain must move quickly and the remaining EU member states also needed to give fresh impetus to the project.

"We have to give a new sense to Europe otherwise populism will fill the gap," he said, stressing that the EU could not wait for British Prime Minister David Cameron to depart in October before the exit process begins.

Ayrault said other EU leaders would put "a lot of pressure" on Cameron at a summit meeting next Tuesday to act quickly.

In Colmar in eastern France, French President Francois Hollande said the separation "will be painful for Britain but ... like in all divorces, it will be painful for those who stay behind too."

France and Germany have drafted a 10-page paper mapping out three areas of immediate concern for the remaining EU members: security, migration and refugees, and jobs and growth.

Global stock markets plunged on Friday, and sterling saw its biggest one day drop in more than 30 years after the British vote to leave the EU. Ratings agency Moody's downgraded its outlook for Britain.

The six foreign ministers lamented the watershed brought by Thursday's 'Brexit' vote and said the EU was losing "not just a member state but history, tradition and experience."

Luxembourg Foreign Minister Jean Asselborn told Reuters: "I believe you can destroy the European Union with referenda. We have to communicate better what the EU is done and we have to work harder on issues such as migration where we have failed."

Both Ayrault and Asselborn warned Britain not to play games by drawing out the exit process.

"There's no reason to play a cat and mouse game. That would not be respectful after deciding to organize this referendum," Ayrault told a news conference after the ministers' meeting.

"It's in Britain's interest and in the interest of Europeans not to have a period of uncertainty that would have financial consequences, and that could have economic and political consequences," he said.

source: www.abs-cbnnews.com

Curves and Edges: A Fil-Am in Moody's

MANILA - Just a light side to the guy we reach out to when we need a health check on our country's sovereign ratings.

Christian de Guzman of Moody's, by name, sounds very Filipino, but it's really hard to tell if you just play it by ear.

With his thick American accent, the Filipino roots is imperceptible.

When he was asked, "Pinoy ka ba?", he answered he is a "Fil-Am," or Filipino-American.

He grew up in Manila and at the age of 8 moved overseas, where he studied, worked and eventually lived.

He took on several jobs in the US, among them the IMF in Washington, D.C. before heading to Singapore, where he's been based for some 15 years now, working senior sovereign risk analyst for Moody's.

He last visited Manila earlier this year for an on-the-ground feel of how our Philippine economy is humming along.

He said the Philippines remains resilient to external shocks. Moody's earlier raised the country's foreign and local bond ratings to just a notch below investment grade, with a "stable" outlook.

source: www.abs-cbnnews.com

US probes Moody's rating agency - report

NEW YORK - US authorities are investigating the credit rating agency Moody's over its glowing assessments of mortgage deals in the runup to the 2008 financial crisis, The Wall Street Journal reported Sunday.

Citing people familiar with the situation, the newspaper said Justice Department officials had met with several former Moody's executives. It wasn't yet clear if the probe would result in a lawsuit.

If the investigation is confirmed, Moody's would become the second major US credit-rating firm in the Justice Department's crosshairs, after a case against Standard & Poor's.

S&P is expected to within days agree to pay $1.37 billion to settle lawsuits over its rosy grading of mortgage bonds in the financial crisis, sources told AFP.

Neither Moody's nor the Justice Department were immediately reachable for comment Sunday.

US authorities are probing whether the firm compromised its standards to score deals, the Journal reported, and the focus is on residential mortgage deals from about 2004 to 2007.

Positive ratings on what turned out to be extremely risky mortgage deals, known as subprime loans, were a main cause of the 2008 financial collapse.

Investors rely on rating firms' grades to assess risk.

Numerous banks have already paid huge fines and settlements for their roles in packaging and selling the bonds as low-risk, solid investments.

source: www.abs-cbnnews.com

Moody's drops France's credit rating

Credit rating firm Moody's Investors Service lowered France's AAA rating a notch Monday, citing the country's high exposure to investments in Spain and Greece.

Moody's said the outlook for France to steer clear of trouble was diminishing, given the high level of investments in troubled eurozone countries, The Daily Telegraph reported Monday.

Moody's, which dropped France from the top rating of AAA to Aa1, also cited France's poor track record in making changes.

Moody's, which gave France's rating a negative outlook nine months ago, is now the second major credit rating agency, along with Standard & Poor's, to downgrade its credit rating.

Fitch Ratings, which is a French company, has so far left France at AAA.

Moody's said France was being hurt by rigid labor laws and outmoded corporate regulations.

While President Francois Hollande's administration was attempting to make positive changes, "The track record of successive French governments in effecting such measures over the past two decades has been poor," Moody's said.

"Moody's is now giving France the same rating as Standard & Poor's, which has allowed us to live with low interest rates for many months," said French Finance Minister Pierre Moscovici, referring to borrowing costs for the French government, which have not been adversely affected by the change in its credit status.

However, "further shocks to sovereign and bank credit markets would further undermine financial and economic stability in France as well as in other euro area countries," Moody's said in a statement.

source: upi.com

Moody's downgrades Nokia credit rating to junk status

PARIS - Ratings agency Moody's downgraded Friday its long-term credit rating of Finnish telecommunications group Nokia by one notch to the speculative level of "Ba1" and said its outlook remained negative.

"Today's rating action reflects our view that Nokia's far-reaching restructuring plan ... delineates a scale of earnings pressure and cash consumption that is larger than we had previously assumed," a Moody's statement said, quoting senior vice president Wolfgang Draack.

The agency nonetheless considered Nokia's decision to take on a drastic restructuring of its operations "as positive and necessary to return the group to profitability.

"A return to profitability also depends on Nokia successfully transitioning its range of smartphones to the new Windows operating system and stabilising its feature phone business," the statement said.

Nokia, one of the world's biggest mobile phone makers, shocked markets on Thursday when it unveiled 10,000 more job cuts as part of deep additional cost-cutting measures.

"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," Nokia chief executive Stephen Elop said in a statement.

Following the news, Nokia, which only recently lost the world number one ranking it had held for 14 years, saw its share price plunge more than 16 percent on the Helsinki stock exchange.

The company, which has been undergoing a major restructuring for more than a year, said it would implement an additional 1.6 billion euros ($2.0 billion) in cost reductions by the end of next year, especially affecting its beleaguered Devices & Services unit.

Moody's underscored positive elements at the Finnish group meanwhile, noting "that Nokia has maintained a strong liquidity position and capital structure.

In addition, "for its liquidity needs, Nokia also has a reliable 1.5 billion euro revolving credit facility due in 2016," the ratings agency said.

source: interaksyon.com