NEW YORK (AP) — Fitch Ratings said Monday that its ratings on McGraw-Hill Cos. remain unchanged despite the revelation that the Securities and Exchange Commission is weighing taking civil action against McGraw-Hill subsidiary Standard & Poor’s for its rating of a 2007 mortgage debt offering.
New York-based McGraw-Hill said Monday in a regulatory filing that the SEC staff had told the company it’s considering recommending that the agency act. The SEC’s staff said it may recommend to the five SEC commissioners that they seek a civil fine and restitution.
The formal notice from the SEC’s enforcement staff gives S&P a chance to make a case that there’s no basis for charges. S&P has said it’s been cooperating with the SEC and will continue to do so.
Fitch said that its ratings for McGraw-Hill have reflected the risk of a regulatory action against the company, noting that it has a negative outlook on McGraw-Hill’s ratings.
A negative outlook means it is likely the rating will be decreased at some point in the next eight to 12 months.
Fitch said its outlook reflects the uncertainty of potential changes to financial policy following the spin-off of the McGraw-Hill Education business and the potential for further rating downgrades.
The ratings firm said McGraw-Hill has $1.3 billion in cash and access to $1.2 billion as part of a bank credit line due 2013. For perspective, Fitch noted that the top 10 largest SEC settlements have ranged from $800 million to $300 million.
Fitch has McGraw-Hill’s issuer default and senior unsecured ratings at “A-,” and its short-term issuer default and commercial paper ratings at “F2.”
McGraw-Hill shares slipped 54 cents to $42.66 in aftermarket trading. The shares added 27 cents to end the regular session at $43.20.
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