UPDATE 1-Moody’s may cut McGraw-Hill on finreg legislation

(Adds details, background on S&P’s cut of Moody’s CP rating)

NEW YORK, July 16 (BestGrowthStock) – Moody’s Investors Service
said on Friday it may cut senior unsecured and commercial paper
ratings of McGraw-Hill Cos, parent of Standard & Poor’s, due to
the U.S. financial overhaul legislation and increased global
scrutiny of credit-rating agencies.

Moody’s placed McGraw-Hill’s (MHP.N: ) A2 senior unsecured
rating, the sixth-highest, and Prime-1 commercial paper ratings
on review for possible downgrade following approval by the
Senate of financial overhaul legislation that includes a number
of provisions affecting credit-rating agencies.

“The review is prompted by the heightened uncertainties and
potential negative long-term effects on McGraw-Hill from the
Financial Overhaul Legislation and increased global scrutiny of
credit rating agencies,” Moody’s said.

The move comes one day after S&P cut its commercial paper
rating on its rival Moody’s Corp (MCO.N: ) by one notch, saying
business risk has increased with passage of the financial
reform legislation.

S&P cut Moody’s commercial paper rating one notch to A-2,
the third-highest ranking, from A-1. For details, click
[ID:nN15244470]

Moody’s also said on Friday it expects President Barack
Obama will sign the bill into law shortly, based on his
announced support for the legislation.

One factor Moody’s said it will consider will be how
securities fraud cases may be brought against credit-rating
agencies and whether that will lead to an increase in lawsuits
against Standard & Poor’s, McGraw-Hill’s largest operating
segment.

“The liability standards on which securities fraud cases
are evaluated are not changing,” Moody’s said. “However,
Moody’s will consider the potential effect on McGraw-Hill’s
litigation exposure and defense costs if a larger volume of
cases were to survive a motion to dismiss, enter discovery and
proceed to trial.”

Moody’s said it believes “McGraw-Hill’s strong liquidity
position and low financial leverage provide flexibility to
manage the risks it faces in the near term, but the
intermediate-to-long-term effect is uncertain,” Moody’s said.
(Reporting by Walden Siew; Editing by Dan Grebler)

UPDATE 1-Moody’s may cut McGraw-Hill on finreg legislation