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Tuesday, February 26, 2008 10:45 AM

MBIA Maintains Highest Rating, Pfizer Cut

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Let's compare the financials of two stocks: MBIA (MBI) which has Moody's top rating of Aaa and Pfizer (PFE) recently downgraded by Moody's to Aa1 and by Fitch to AA-Plus from AAA. Here are two recent downgrades of Pfizer.

December 12, 2007
Pfizer loses top "AAA" rating from Fitch

December 13, 2007
Pfizer's 900 mln eur new senior unsecured notes rated 'Aa1' - Moody's

Pfizer Financials

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MBIA Financials

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What is Moody’s rating scale?

Moody's Rating Scale
runs from a high of Aaa to a low of C, and comprises 21 notches. It is divided into two sections, investment grade and speculative grade. The lowest investment grade rating is Baa3. The highest speculative-grade rating is Ba1.

Long-Term Debt Ratings (maturities of one year or more):

Investment Grade
Aaa – “gilt edged”
Aa1, Aa2, Aa3 – high-grade
A1, A2, A3 – upper-medium grade
Baa1, Baa2, Baa3 – medium grade

Speculative Grade
Ba1, Ba2, Ba3 – speculative elements
B1, B2, B3 – lack characteristics of a desirable investment
Caa1, Caa2, Caa3 – bonds of poor standing
Ca – highly speculative
C – lowest rating, extremely poor prospects of attaining any real investment standing
Compare Financials
  • Profit margin -61.76% vs. +17.07%
  • Return on Equity -35.54% vs. +12.13%
  • Revenue $3.12 Billion vs. $48.61 Billion
  • Earnings Per Share -$15.22 vs. +$1.20
  • Total Cash $5.73 Billion vs. $20.30 Billion
  • Total Debt $17.44 Billion vs. $8.69 Billion
Do the finacials of MBIA look "gilt edged"?

Heck, do they look investment grade at all?

With that, I invite you to read two posts I wrote yesterday in regards to MBIA.
Is there any other way to interpret the above ratings other than incompetence or corruption? If there is, can someone please tell me what it is?

Minyan Michael noticed the date of the downgrade from Moody’s as originally published was from 2006. I had several downgrades I was looking at and did not put in the most recent ones. The article above now shows the correct links, from December 2007.

Mike "Mish" Shedlock
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