Credit Rating Agencies Settle Lawsuits Over Debt Vehicles

The lawsuits had accused Moody’s, a unit of Moody’s Corporation, and S.& P., a unit of McGraw-Hill Companies, of negligent misrepresentation over their activities regarding the Cheyne and Rhinebridge structured investment vehicles.

Morgan Stanley, which marketed both debt vehicles and helped structure the Rhinebridge one, also settled.

Settlement terms were not disclosed in the cases, which had been brought in 2008 and had sought more than $700 million of damages. Both lawsuits were dismissed with prejudice, meaning they cannot be brought again.

Spokesmen for Moody’s, McGraw-Hill and Morgan Stanley confirmed their companies’ settlements on Friday.

“This settlement allows us to put the significant legal defense and related costs, as well as the distraction, of these very protracted litigations behind us,” said a Moody’s spokesman, Michael Adler.

A spokesman for McGraw-Hill, Jason Feuchtwanger, said the company’s settlement involved no admission of wrongdoing.

Lawyers for the plaintiff investors did not immediately respond to several requests for comment.

A trial in the Cheyne case had been scheduled for May 6 before United States District Judge Shira Scheindlin in Manhattan, who oversaw both lawsuits.

Credit rating agencies have been accused by investors, regulators and politicians of inflating the ratings of risky mortgage-backed and structured securities in a bid to win new business.

Critics said these activities also fueled demand from investors who thought the ratings were objective, but prices collapsed once the risks materialized, helping incite the 2008 global financial crisis.

S.& P. still faces the Justice Department’s $5 billion civil fraud lawsuit filed in February over its ratings, the government’s first major postcrisis action against a credit rating agency. S.& P. is trying to dismiss that case.