Today Moody’s lowered ratings on 16 SIVs representing about 10% of SIV debt outstanding. Ouch.
Moody’s Investors Service downgraded more ratings on structured investment vehicles on Wednesday and warned that the funds are in a more precarious position than they were in early September, previously considered the height of this year’s credit crisis.
Moody’s said it cut or may downgrade ratings on structured investment vehicles (SIVs) with roughly $33 billion in debt. That affects 28 debt programs run by 16 SIVs, including Victoria Finance, Harrier Finance Funding and Kestrel Funding, the agency noted. More than 10% of all SIV debt was affected by the move.
Victoria, with more than $11 billion in debt, is run by SIV specialist Ceres Capital Partners. Harrier, also with more than $11 billion in debt, is sponsored by German bank WestLB. Kestrel, which has more than $3 billion in debt, was also set up by WestLB…..
Some of these SIVs can’t refinance themselves in the asset-backed commercial paper market because investors won’t buy the new debt. That’s forced some to sell assets at depressed prices, realizing big losses, Moody’s explained.
“The situation has not yet stabilized and further rating actions could follow,” Moody’s said in a statement. “SIV senior note ratings continue to be vulnerable to the unprecedented large and sustained declines in portfolio value combined with a prolonged inability to refinance maturing debt.”
Victoria Finance’s capital note program was downgraded to Caa3, a junk rating, from Baa2, an investment-grade rating, Moody’s said. Harrier’s capital note program was also cut to junk status, the agency said. Kestrel’s income note program was downgraded to junk too.