S&P offers rare defense of Lehman 'A' rating

NEW YORK, Sept 24 (Reuters) - Standard & Poor's on Wednesday offered a rare defense of the investment grade rating it had assigned to Lehman Brothers Holdings Inc when the investment bank filed for bankruptcy on Sept. 15.

The rating agencies have come under heavy criticism from politicians and investors for their slow reaction to the way the housing downturn has battered companies and securities they rate.

In a report, S&P defended itself for maintaining an 'A' rating on Lehman debt, arguing that the bank's collapse was due more to negative market sentiment than fundamentals that could have been pinpointed by its credit analysts.

S&P's 'A' rating is the sixth-highest investment grade, and a full four notches above speculative, or junk, status.

"In our view, Lehman LEHNG.PK had a strong franchise across its core investment banking, trading, and investment management business," analyst Scott Sprinzen said in a statement.

The bank had adequate liquidity to cope with "severe and foreseeable temporary stresses" and was well-positioned to generate earnings once the current downturn was over, he said.

"We believe the downfall of Lehman reflected escalating fears that led to a loss of confidence -- ultimately becoming a real threat to Lehman's viability in a way that fundamental credit analysis could not have anticipated with greater levels of certainty," he said.

(Reporting by Ciara Linnane, Editing by Chizu Nomiyama)