Bloomberg to enter credit rating business

Discussion in 'Wall St. News' started by nutmeg, May 12, 2010.

  1. "Bloomberg apparently has plans to start offering an analytic tool, to go with the thousands available on its terminals, that would effectively rate a company's bonds. The Daily Mail has come up with an internal memo from someone at Bloomberg that notes the firm wants to offer users of its flagship data terminals a 'robust gauge' of a debt issuer's creditworthiness, updated daily. The rating would apparently be driven by the service's considerable computing and analytical power embodied in each terminal.

    What's unclear is how this will be paid for. Will the firm charge a premium for monthly terminal rentals to gain access? Or will it charge a la carte? Or will it come as a new service in the existing subscription plan? There are other issues as well. Will they assign traditional letter ratings?

    This would be an important development because the current payment model, in the eyes of many, is near the heart of the ratings industry's conflict of interest--issuers pay for their own ratings. This has often been criticized, but accepted solutions--excepting the investor/client-pays model of Egan-Jones--have been rare. Bloomberg certainly has the brand name to make its ratings credible. I'm sure they will seek to monetize this to the maximum extent possible. And I really doubt they will ask issuers to pay. Stay tuned."

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