Cantor to Moody’s: You’re dead to me!
Cantor Fitzgerald’s feud with ratings agency Moody’s Investors Service, which this week downgraded the prominent Wall Street firm, dates back to the dog days of summer.
Back on July 5, Cantor sent a letter to Moody’s asking it to terminate their relationship — and requested that the agency cease from offering ratings opinions on the firm, headed by CEO Howard Lutnick.
About three weeks after Cantor’s request, the ratings agency stripped the company’s publicly traded affiliate BGC Partners of its investment-grade rating, cutting it to Ba1 from Baa3.
Cantor, which has staged a phoenix-like rise since 9/11 when it lost hundreds of employees from its World Trade Center offices, has been expanding into a laundry list of new businesses since the financial crisis.
It has been feuding with Moody’s for months over its differing opinions of Cantor’s profitability — a feud that generally stayed below Wall Street’s radar.
On Thursday, the testiness erupted into public view when Moody’s decided to drop Cantor’s senior debt rating to junk and drop BGC another notch down Moody’s junk ladder to Ba2.
It’s not unusual for a company to terminate its relationship with a ratings agency over disputes over ratings.
A rating change can significantly increase the cost of borrowing for a major financial institution like Cantor.
Ratings firms have grown consistently gloomy over the earnings prospects for Wall Street firms.
“Moody’s expects the capital markets operating environment to be challenging for all participants for the medium term,” the agency wrote of its Cantor downgrade.