Moody's stock suffers record plunge on rating error

(Corrects first and fourth paragraphs to clarify Moody's is reviewing the matter and has not commented directly on substance of FT report, deletes analyst comment)

By Walden Siew

NEW YORK, May 21 (Reuters) - Shares of Moody's Corp (MCO.N) fell more than 13 percent on Wednesday, the biggest one-day drop since becoming an independent company in 2000, after the rating agency said it is reviewing whether a computer error resulted in incorrect top ratings for complex debt.

The Financial Times first reported a coding error resulted in wrong "Aaa" ratings for debt known as Constant Proportion Debt Obligations, known as CPDOs. For details, see [nL21227829]

A Moody's spokesman in New York said the rating agency is "conducting a thorough review" of its rating methods for European CPDOs specifically. The review of its computer coding does not extend to subprime mortgage debt, collateralized debt obligations or corporate bonds, Moody's said.

Moody's shares fell over 13 percent to $37.95 in the largest one-day drop in the stock since it was spun off from Dun & Bradstreet in 2000.

Agencies like Moody's Corp (MCO.N), McGraw-Hill Cos. Inc.'s (MHP.N) Standard & Poor's and Fimalac's (LBCP.PA) Fitch Ratings have been under pressure by investors, regulators and critics for the past year for incorrectly rating subprime mortgage debt.

Losses from deteriorating subprime mortgage and repackaged debt have led to more than $400 billion of market losses, according to Fitch Ratings.