- Mich hat fast der Schlag getroffen (mBuL) - DT, 26.10.2007, 23:20
- Hi DT, ist das irgendwie tradebar?,,, mkT - igelei, 26.10.2007, 23:32
- PS: Bei den Banken schläft mit Sicherheit niemand mehr ruhig. (o.Text) - igelei, 26.10.2007, 23:40
- Die haben ja auch lange genug geschlafen! (o.Text) - Vatapitta, 26.10.2007, 23:44
- BTW ins Blaue: Ackermann hängt mit 29 Mrd. bei den Subprimes-wenn..mkT - igelei, 26.10.2007, 23:46
- 29M sub bei 40Ct/$ viell. 10x AAA 290M zu 85Ct/$ bilanziert?@dottore mT - igelei, 27.10.2007, 00:08
- Deutsche Bank prĂĽft Beteiligung an Krisenfonds - chiron, 27.10.2007, 09:31
- der DtBank-Aktienkurs spricht Bände /aber sie haben ja nur AAA gekauft ;-) (o.Text) - nasowas, 27.10.2007, 11:17
- PS: Bei den Banken schläft mit Sicherheit niemand mehr ruhig. (o.Text) - igelei, 26.10.2007, 23:40
- Hier ist zumindest schon ein Hinweis auf die heutigen brutalen Verläufe (mT) - DT, 26.10.2007, 23:57
- Hi DT, ist das irgendwie tradebar?,,, mkT - igelei, 26.10.2007, 23:32
Hier ist zumindest schon ein Hinweis auf die heutigen brutalen Verläufe (mT)
-->Moody's Downgrades CDOs
By APARAJITA SAHA-BUBNA
October 26, 2007 2:10 p.m.
NEW YORK -- Moody's Investors Service, in a blitz of press releases Friday, downgraded and placed on review for further cuts the credit ratings on scores of collateralized debt obligations due to the deterioration of assets backing them.
CDOs, which are structured financial products that bundle debt, have been at the heart of recent credit concerns since subprime mortgage bonds had been an important source of collateral for these products.
In the latest reminder that the ramifications of the credit squeeze are still working their way through the financial system, Merrill Lynch & Co. shocked financial markets this week when it announced that it wrote down $6.9 billion on its CDO portfolio.
A Moody's spokesman said the total volume of CDOs being reviewed and downgraded wasn't immediately available, though a count by Dow Jones Newswires of a smattering of the several releases puts these figure in the billions.
"The rating action is the result of deterioration in the credit quality of the transaction's underlying collateral pool, which consists primarily of subprime" home mortgage bonds, said Moody's in a number of press releases, which total approximately 50.
Many of the downgrades in the initial reading of the press releases are severe, with ratings going from investment-grade to junk in one fell swoop, an unusually harsh assessment that will likely impact the overall valuation of deals backed by these instruments.
Derrick Wulf, portfolio manager at Dwight Asset Management, noted that one such recent deal that fell from a sterling AAA status to junk won't help investor confidence that has already been shaken by the subprime debacle.
"When investors see a bond go from AAA to junk in just over six months, the rating agency's credibility suffers. It's clear their ratings methodology was fundamentally flawed.," said Mr. Wulf.
For example, the $873 million CDO slice was rated AAA -- the highest of 10 investment-grade rankings -- was downgraded 10 notches to a non investment-grade or junk rating of Ba1. Ratings on another $229 million of AAA securities within the CDO were slashed 14 notches to a junk rating of B2. In addition, Moody's left the door open to further downgrades on both these slices.
Though the move was widely anticipated amid the subprime mortgage debacle, the scale and the severity of the downgrades and potential downgrades could force some investors to sell their CDO holdings at reduced prices since these difficult-to-trade securities have gone out of favor.
"Now that the downgrades have touched on the AAA space, that represents not only forced sale for many managers, but the largest part of the capital structure," said Julian Mann, portfolio manager First Pacific Advisors."The hands holding many of these tranches are the weakest in the sense that they can't hold them as they go downhill."
It could also result in losses for investors who hold the riskiest tranches of a CDO since the collateral backing it has deteriorated so sharply.
Moody's CDO downgrades show there is"no quick fix for the subprime problem," said Cynthia Cole, senior portfolio manager at Allegiant Asset Management."There won't be any pick-up anytime soon and it will last at least until summer next year," she said, based on the continuing housing slowdown.
The move comes on the heels of Moody's cutting earlier this month the credit ratings on $33.4 billion of mortgage securities. The mortgage bonds downgraded by Moody's were backed by subprime first-lien, or primary mortgages, issued in 2006. These bonds make up 7.8% of the dollar volume of such securities rated by Moody's.
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