S&P and Fitch Being Sued by Chili’s SVS
Dow Jones reports that Superintendencia de Valores y Seguros de Chile (SVS) has announced that it will press charges against Fitch Chile Clasificadora de Riesgo Limitada and Feller-Rate Clasificadora de Riesgo Limitada, a unit of Standard & Poor’s.
The SVS alleges that the two rating agencies misled investors for ratings they had assigned to Empresas La Polar SA. La Polar is embroiled in what the company’s current president, Cesar Barros, describes as “the biggest fraud of a publicly traded company in Chile.”
In June, La Polar broke the unexpected news that it needed to reserve nearly $900 million to cover bad credit card loans. At the same time, they admitted that they had overcharged one million low and middle-income consumers for past-due store credit card bills; this in a country of only 17 million.
Before the scandal broke, Fitch had rated La Polar A-minus with a negative outlook; Feller-Rate had assigned La Polar’s debt as BBB+ and stable. They both now rate the debt as D.
SVS believes that the rating agencies should have spotted the “inconsistencies.” They said in a statement that, “The SVS feels there is enough evidence to believe Feller and Fitch didn’t comply with the law that establishes an obligation for ratings agencies to give an informed and independent opinion.”