MHP is the owner of Standard and Poor’s, the largest bond-rating agency.
According to analysts, S&P is a large cash generating machine and
considering the low interest rate environment…many corporations are
rushing to the fixed income market in order to lock in the Federal Reserve’s
artificially low rates. This plays directly into the hand of MHP, for they
naturally have to rate all these bonds. According to analyst Peter Appert,
the ratings segment is, “extraordinarily robust.” This is the segment,
however that is getting them in trouble.
The stock has a pending lawsuit hanging over it. The USA department of
Justice is alleging that Standard and Poor’s mislead investors in various
exotic asset backed securities during and before the financial crisis. The
DOJ is seeking 5 billion in the lawsuit, which is more than 5 years of profits
for the company.
The company took a hit on on earnings as a result of a fee from the sale of
their education business to Apollo Global Management. This resulted in an
expected loss, but revenues were better than expected. Specifically, the
company suffered a loss of 216 million.
