S.&P. Cuts European Union’s Credit Rating

The agency removed the bloc’s top-level AAA long-term credit rating, lowering it one level to AA+, citing “the overall weaker creditworthiness of the E.U.’s 28 member states.”

On Friday afternoon, S.&P. issued a clarification, emphasizing that the downgrade applied only to the European Union’s borrowing as a supranational body and that the move had no effect on individual member states.

The timing of the announcement was inauspicious, coming on the last day of a meeting of European Union officials and heads of state, whose capstone achievement was an agreement for the creation of a European system for winding down failed banks. That plan, despite limits that critics have been quick to point out, was supposed to demonstrate the bloc’s commitment to building a banking union, locking member states into an ever-tighter economic embrace.

S.&P. was apparently unconvinced. “We believe the financial profile of the E.U. has deteriorated, and that cohesion among E.U. members has lessened,” it said in explaining the downgrade. The firm also pointed to disputes over the European Union’s budget and to Britain’s plan for a referendum on remaining in the European Union as signs that solidarity was under strain.

The European Union’s borrowings of 56 billion euros, or $76 billion, are separate from those of member states and from finance programs like the European Financial Stabilization Mechanism and the European Atomic Energy Community. The ratings agency said 80 percent of the borrowing was currently extended to Portugal and Ireland, a legacy of the sovereign bailouts.

The European Commission, the executive arm of the union, took umbrage. “The commission disagrees with S.&P. that member states’ obligations to the budget in a stress scenario are questionable,” Olli Rehn, the commissioner for economic and monetary affairs, said in a statement. “All member states have always, and also throughout the financial crisis, provided their expected contributions to the budget in full and in time.”

S.&P. denied any link between the downgrade and the announcement of the banking resolution deal. Rather, it said it was a result of the falling credit scores of member states since it first put the bloc’s rating on review at the beginning of 2012 and delays and debate over the European Union’s budget.

Christian Schulz, an economist at Berenberg Bank in London, wrote in a note that the ratings downgrade “is largely symbolic as the E.U., at least in the grand scheme of things, does not borrow much.”

Investors, for their part, chastened by the ratings agencies’ blessing of financial dross during the credit bubble, have ignored many S.&P. decisions in recent years, and there was no market impact on Friday.

Another Candidate Responds to 'Not Recommended' Rating

The Legal reached one more Philadelphia judicial candidate after our print deadline passed for our story on the ratings arm of the Philadelphia Bar Association rating 13 judicial candidates as "not recommended."

Another Candidate Responds to 'Not Recommended' Rating

The Legal reached one more Philadelphia judicial candidate after our print deadline passed for our story on the ratings arm of the Philadelphia Bar Association rating 13 judicial candidates as "not recommended."

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.

Rating Agencies Watching Debt Ceiling Limit Again

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