46 Brokerage Firms Continue Pattern of Recommending Failing Companies Despite Intense Regulatory Scrutiny, According to Weiss Ratings.

Business and finance Editors

PALM BEACH GARDENS, Fla.--(BUSINESS WIRE)--Oct. 7, 2002

47% of Companies that Filed Chapter 11 May through August Received

Unanimously Positive Ratings

Among the 62 brokerage firms covering companies filing for bankruptcy between May 1 and August 31, 2002, 46 firms, or 74 percent, continued to recommend that investors buy or hold shares in the failing companies(1) even as they were filing for Chapter 11, according to a study by Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

A total of 54 publicly traded companies filed for bankruptcy during the four-month period studied. Of this group, 19 bankrupt companies were rated by the brokerage firms covered in this analysis, receiving a total of 126 ratings. Those ratings break down as follows:

  Breakdown of Ratings Issued by the 62 Brokerage Firms on Companies
                          Filing Chapter 11

                                   On Date of         6 Months Before
                               Bankruptcy Filing     Bankruptcy Filing

Ratings Issued                  # of         %       # of          %
                               Ratings              Ratings

"Buy" or equivalent               28       22.2%       53       42.1%
"Hold" or equivalent              56       44.4%       59       46.8%
"Sell" or equivalent              34       27.0%       11        8.7%
Dropped coverage/not rated         8        6.3%        3        2.4%
              Total              126      100.0%      126      100.0%

"Given the highly misleading ratings still being disseminated by the brokerage community, it's no wonder investor confidence in the markets remains so low," commented David Lackey, president of Weiss Ratings, Inc. "Although this represents an improvement over the ratings collected in our previous study, Wall Street clearly has a long way to go before genuine reform takes hold."

In its previous analysis covering the first four months of 2002, Weiss Ratings determined that 90.9 percent of the ratings issued on companies filing for bankruptcy were either "buy"(2) or "hold"(3) ratings, compared to the 66.6 percent issued in this most recent four-month period. Conversely, the previous Weiss study found that only 9.1 percent of the ratings issued to the bankrupt companies were "sell"(4) ratings, whereas "sell" ratings comprised 27 percent of the total ratings reviewed in the current Weiss study.

47% of Failing Companies Continued to Receive Unanimously Positive

Ratings

Of the 19 failing companies rated by brokerage firms, nine, or 47 percent, continued to receive strictly positive ratings on the date of their bankruptcy filing. For example, on the day it filed for Chapter 11, APW Ltd. received two "buys" and five "holds." Another nine companies received a mix of positive and negative ratings, including Adelphia Communications, which received five "buys," three "holds" and two "sells," and WorldCom, Inc., which received seven "buys," six "holds," and fourteen "sells." Only one company, Panaco, Inc., received a "sell" rating exclusively. The table below summarizes the ratings received by the 19 rated companies that filed Chapter 11 between May 1 and August 31, 2002 as of the date of failure and six months prior to failure.

Breakdown of Ratings Received by 19 Companies Prior to Bankruptcy

On Date of Bankruptcy Filing 6 Months Before Bankruptcy Filing

Companies Receiving:         # of Cos       %       # of Cos      %

"Buys" and/or "Holds" only       9        47.4%         15      78.9%
"Buys," "Holds" and/or "Sells"   9        47.4%          4      21.1%
"Sells" only                     1         5.3%          0       0.0%
                        Total   19       100.0%         19     100.0%

34 Brokerage Firms Fail to Issue Any Warnings to Investors

Among the 62 brokerage firms studied, 34 failed to issue a single "sell" rating on any of the companies filing for bankruptcy during the four-month period ending August 31. For example, CIBC World Markets maintained three "buy" ratings and two "hold" ratings on failing companies, while Thomas Weisel Partners maintained three "buy" ratings and one "hold" rating up through the date the rated companies filed for bankruptcy. In addition, Goldman Sachs and Credit Suisse First Boston each maintained five "hold" ratings on failed companies at the date of bankruptcy. Also sticking with "buy" ratings until the very end were ABN Amro, Argentina Research, Bank of America, Buckingham Research, Commerzbank Securities, Dresdner Kleinwort Wasserstein, Jesup & Lamont Securities, JP Morgan, Kaufman Brothers, Pacific Crest Securities, Performaxx AG, Raymond James, RBC Dain Rauscher, Robertson Stephens, Sanford C. Bernstein, SG Cowen, SoundView Technology, and USB Piper Jaffray.

Fourteen firms avoided issuing positive ratings on failing companies, issuing only "sell" ratings at time of bankruptcy, including Argus Research, BB&T Capital Markets, Davenport & Co., Fortis Bank and HSBC. Another 14 firms issued "sell" ratings by the date of the bankruptcy filing but also maintained at least one positive rating on other bankrupt companies.

Weiss issues safety ratings on more than 15,000 financial institutions, including insurance companies, banks, and brokerage firms. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 7,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates.

Consumers can purchase a rating for as little as $7.95 through www.WeissRatings.com, or starting at $15 by calling 800/289-9222.

Note to Editors: Available upon request are a table listing the 62 brokerage firms with their ratings on 19 companies that filed Chapter 11 May 1 - August 31, 2002 broken out in buy/hold/sell categories and another table with a breakdown of the buy/hold/sell ratings received by those 19 companies.

(1) In total, 54 publicly traded companies filed for Chapter 11 between May 1 and August 31, 2002, with a combined peak market capitalization of $185 billion. Of these, only 19, with a combined peak market capitalization of $175 billion, were rated by the brokerage firms covered in this analysis. The analysis covered 123 stock ratings available from 62 brokerage firms six months before bankruptcy and 118 ratings at the date of bankruptcy filing, reflecting some firms' decision to drop coverage. Data source: The latest ratings publicly available on or from Bloomberg, Yahoo.com, and Briefing.com.

(2) "Buy" = "strong buy," "buy," "recommended list," "accumulate," "attractive," "outperform," "overweight," and "add."

(3) "Hold" = "hold," "hold/neutral," "market perform," and "fairly valued."

(4) "Sell" = "reduce," "sell," "underperform," "underweight," "unattractive," "avoid," and "source of funds."