Lehman angry at downgrading

MOODY'S Investors Service, one of the world's leading credit-rating agencies, is coming under increasing attack from companies it downgrades.

Earlier this year, Bankers Trust, the US bank, contested a Moody's re- rating, and now Lehman Brothers, the New York-based securities house, has complained about having its credit rating cut from A3 to Baa1.

In a rare outburst, Lehman issued a public letter which said: "We do not understand Moody's decision, considering they had affirmed our single A rating in February after an intensive four-month review of our firm."

Informing Lehman of its decision, which can make it dearer for the securities house to borrow, Moody's said the global securities industry's operating environment had become more challenging, and a robust industry recovery seemed likely to be delayed.

It cited "deepening losses in emerging markets, constriction of the derivatives business and the collapse of Barings plc". The agency added: "This operating environment may lead Lehman to take additional risks to generate adequate returns over the medium term."

Lehman, which has its European base in the City's Broadgate complex and had pre-tax profits of $193m (£120m) on turnover of $9.1bn in the first 11 months of last year, hit back.

Patricia Hamzahee, the firm's director of European Corporate Communications, said: "Lehman is stronger today than at any time in its 150-year history. We disagree with Moody's rationale on several key points. We don't agree with their industry concerns, and we have not been affected by the issues they raised. We continue to manage risk conservatively and have not suffered any major losses during this volatile period."

Hugh Pye, analyst at BZW, said: "This is most unusual. Normally a rating agency doesn't issue a re-rating until the bank in question has accepted it."

Haig Nargison, the Moody's analyst in New York responsible for downgrading, said: "They're entitled to their opinion."