Sheila King, finance director for the Alaska Student Loan Corp., is accusing Moody's Investors Service of placing her agency's outstanding bonds under a negative watch as retaliation for the issuer advising the rating agency it didn't plan to use it for an upcoming offering. Moody's executives, naturally, say her accusations are completely off base.
Moody's shortly thereafter confirmed the bonds' triple-A status and withdrew its ratings.
Earlier this month, Alaska decided to use Fitch Ratings and Standard & Poor's to rate an upcoming issue and requested that Moody's withdraw its ratings on the issuer's 2002 and 2003 student loan revenue securitizations. King said Moody's would have charged $50,000 to rate the new deal the Alaska issuer was preparing, $15,000 more than the cost of either a S&P or Fitch assessment. "I wanted a fresh set of eyes going into this transaction," she explained. "We didn't need three [ratings] and Moody's is the most expensive," she said.
King added there were also service issues that led to the decision to change. She said she asked Moody's to terminate its existing ratings for reasons of continuity.
After placing the bonds on watch, Moody's shortly thereafter confirmed their triple-A status and withdrew its ratings. But King was still unhappy.
She insisted there was no justification for placing the bonds on watch. "Our trust is collateralized at a level higher than most, and from that perspective, I don't see any financial point in doing it. There was no basis in the cash flows for it," she added.
Moody's Michael Kanef, managing director, said "Before we could withdraw the rating, we needed to be confident the rating was at the appropriate level." It is commonplace for rating agencies to review a rating before they withdraw it, he added. "This was definitely not an action taken because we were not asked to rate the new bonds." Nicolas Weill, senior v.p., chief credit officer, added: "It's 100% untrue," of King's charge.
