AFed - I think MHP is an interesting value pick, but your EV value numbers are a bit off since S&P's numbers indicate a 12.5B$ EV and we assume they know what they are doing :-).
i think the fine will be way less than 5B$, the important thing to notice is that this is not a criminal lawsuit, so I think it's going to be more a slap on the wrist kind of fine.
The real risk is not a one time fine, it is the risk that future legislation impact their business (by for example enhancing competition by allowing new entries into the rating space, or curtailing their ability to work with customers to creating securities with a certain target rating).
FWIW, these rating agencies are playing a pretty obvious game, by stating on one side that their rating is merely an opinion, but on the other side, this opinion can have very serious consequences when it automatically triggers collateral payments and such (which happened to MS for example when they were downgraded). Then there is the fact that there are only 3 opinions that matter (MCO, MHP and Fitch) and other entries in the space are basically barred also does not make sense with the "opinion" claim.
The famous line in the Spiderman movie was "Was great power comes great responsibility". Apparently, the ratings agencies don't believe this applies to them, but that is what makes it a great business. And I believe, it will probably stay that way...
I am considering a buy here. |
