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Customers of Moody’s Corporation:

As you may be aware, there have been reports in the news media of an error in a model that Moody’s Investors Service used in certain of its ratings of European constant proportion debt obligations (CPDOs). Moody’s rated a total of 44 European CPDO tranches, representing approximately $4 billion in rated securities.

We recognize the seriousness of the questions raised by these media reports. Upon learning of this situation, I directed our Legal and Compliance staff to undertake a thorough review of our European CPDO rating process. The law firm of Sullivan & Cromwell has been retained to conduct this review and will report back to me upon completion of their fact-finding and assessment. I will then take appropriate action to respond to the findings.

The integrity of our ratings and rating methodologies is essential to sustaining confidence in the accuracy and reliability of our ratings. I assure you that we will be vigilant in our efforts to establish the facts of this situation and will act quickly and decisively to address any need for changes to our processes.

I should note that as a rating agency, Moody’s often adjusts its analytical models and enhances its methodologies for a variety of reasons, such as to reflect changing credit conditions and outlooks. While the agency has modified analytical models on the infrequent occasions that errors have been detected, it is inconsistent with Moody’s analytical standards and company policies to change models and methodologies for any reason other than to improve the accuracy of our ratings.

Needless to say, our relationships with customers are of the utmost importance to us. We recognize that you may have questions or concerns that relate to this matter, and remain committed to a transparent, open dialogue with you. While we ask for your patience while the review is being conducted, we will of course make every effort to respond to your inquiries in the meantime.

Raymond W. McDaniel, Jr.
Chairman and Chief Executive Officer