Moody's cuts LaBranche ratings

Moody's Investors Service said it lowered the senior ratings for LaBranche & Co. Inc. to Ba1 from Baa3 and subordinated debt to Ba2 from Ba1.

Moody's said that the rating change was based upon LaBranche's constrained financial flexibility at the holding company in light of the costs of the recent regulatory settlement with the Securities and Exchange Commission and the New York Stock Exchange, which comes at a time when $100 million of the company's $350 million of term debt is coming due.

According to Moody's, the longer-term issue for LaBranche is the outcome of the current controversy over market structure and the potential impact on the NYSE and the economics of the specialist business. Though the new CEO of the NYSE has come out in support of the specialist model, competitive and political pressures are very high and may result in structural change that could alter the long-term profitability of the specialists, including LaBranche.

Moody's said the outlook remains negative pending a material improvement in the holding company's liquidity structure and alternate liquidity, as well as until greater clarity emerges with respect to potential structural changes at the NYSE and the impact on the specialists.

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