ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, May 29, 1996 TAG: 9605290111
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: NEW YORK
SOURCE: ASSOCIATED PRESS
Moody's Investors Service, the nation's oldest credit rater, told employees Tuesday to expect layoffs and sweeping organizational changes in the firm's first major overhaul in more than a quarter century.
Moody's cited competitive pressures for the management and staff shake-up. But the overhaul is just the latest ripple at a venerable Wall Street credit rater whose main business is under investigation by the Justice Department.
At issue in the federal probe, disclosed this past spring, is whether Moody's may have pressured bond issuers to hire it or risk facing negative comments or lower ratings on their securities.
Early this month, a federal judge dismissed a lawsuit by a Colorado school district claiming Moody's gave it a bad rating because it refused to hire the agency. Antitrust claims are still pending.
Asked whether the changes were a result of the Justice Department probe, Moody's spokesman George Fasel said ``absolutely'' not, noting that the reorganization was in the works since October.
Moody's, founded in 1909, did not specify how many of its 1,400 staffers will be laid off as managers ponder cost cuts in coming weeks.
Among the announced changes is a new way for handling bond rating assignments. Moody's public finance department, which rates municipal bonds, will no longer be a stand-alone unit and will now report directly to the company president. The department, a focus of the Justice probe, will be part of a larger group that also rates corporate debt.
The departures of several high-ranking Moody's officials, including the retirement last week of company president John Bohn, marked the beginning of the broad upheaval, the Journal said. Fasel said Bohn retired for personal reasons.
Bohn was succeeded last week by William Dwyer, who came out of retirement to take the job and has begun to implement the findings of an internal management report.
Dwyer cited the need ``to succeed in a more competitive world'' in an internal memorandum to employees Tuesday, a copy of which was faxed to The Associated Press.
Moody's already has replaced its senior management team.
Thomas McGuire, who headed the corporate ratings department, resigned last week in the shake-up. Another official, public finance head Daniel Heimowitz, also resigned.
The new head of public finance, Doug Watson, will report to Don Noe, the new head of credit ratings and analysis. The company's marketing functions, which used to be controlled by individual departments, will be handled by a separate department run by Scott Douglass, who had headed the company's international group.
New York-based Moody's is owned by Dun & Bradstreet Corp. It and Standard & Poor's Corp. are the dominant firms in the business of evaluating the creditworthiness of bonds and other securities sold by government agencies and corporations.
The Justice Department probe, opened in March, casts a harsh light on the enormously influential ratings issued by credit rating agencies. The ratings are an important benchmark for calculating the interest issuers pay to attract investors. An unfavorable rating can force an issuer to pay higher rates, and even exclude certain state pension funds and mutual funds from buying the securities at all.
As part of the probe, Justice investigators sent civil subpoenas, known as civil investigative demands, to Moody's and its main competitors, Standard & Poor's and Fitch Investors Service.
LENGTH: Medium: 72 linesby CNB