Settlements have been reached in two long-running lawsuits seeking to hold Moody’s Investors Service and Standard & Poor’s responsible for misleading investors about the safety of risky debt vehicles that they rated.
The lawsuits had accused Moody’s, a unit of Moody’s Corp, and S&P, a unit of McGraw-Hill Cos , of negligent misrepresentation over their activities regarding the Cheyne and Rhinebridge structured investment vehicles (SIVs).
Morgan Stanley , which marketed both SIVs and helped structure the Rhinebridge SIV, also settled. Both cases were dismissed with prejudice. Settlement terms were not disclosed.
Spokesmen for McGraw-Hill and Morgan Stanley confirmed the settlements, as did a person familiar with the Moody’s settlement. Moody’s did not respond to requests for comment.
A trial in the Cheyne case had been scheduled for May 6. In both cases, investors accused the rating agencies of collaborating with the banks in arranging for SIVs to receive ratings as high as “triple-A,” even though much of the underlying collateral was low-quality or subprime mortgage debt.
Shares of Moddy’s and McGraw-Hill Markets (parent of S&P) rose sharply.