Moody’s Drops Proposal to Assess Credit More Often

Moody’s Investors Service is backing away from the idea of raising and lowering corporate credit assessments more often--a plan it put forth in the wake of Enron Corp.’s largely unforeseen collapse.

The credit-rating firm said it is bowing to pressure from investors who said the proposal to react more quickly to perceived changes in companies’ finances would make corporate bond prices and perhaps stocks too volatile.

“We expected that investors would be enthusiastic, but they were not,” said Chris Mahoney, chairman of Moody’s credit policy committee in New York. “They were very, very vocally opposed to an increase in ratings volatility.”

Moody’s is seeking to balance demands from investors that ratings on companies don’t swing too wildly, while ensuring that they accurately reflect shifting credit risks. Lawmakers have been calling for ratings procedures to be tightened to detect deteriorating corporate credit. Moody’s rated Enron an investment-grade company until four days before the company went bankrupt.

Investors for years have complained that the top two rating companies, Moody’s and Standard & Poor’s, have taken too long to upgrade or downgrade companies. Yet the prospect of rapid changes now has them unnerved.

Money managers base investment decisions partly on ratings given to bonds by Moody’s and S&P.;

Investors can be forced to sell securities if ratings change notably, particularly from investment-grade to junk.

Moody’s said it still plans to hasten reviews of credit ratings, which typically have taken as long as 90 days. The firm already has sped up some of its ratings.

Ford Motor Co., for example, was under review for a possible downgrade for just three days in January before Moody’s cut the firm’s ratings. The previous review took two months.

Moody’s said it also will pay more attention to bond and stock market moves, but it “will not allow such market opinion to take the place of fundamental credit analysis.”