S&P may downgrade Land Securities CMBS rating

LONDON, June 24 (Reuters) - Standard & Poor's said it may cut the ratings of nearly 3.8 billion pounds ($6.3 billion) of commercial mortgage-backed securities (CMBS) from a unit of Land Securities Group (LAND.L), Britain's biggest property company.

The ratings agency said on Wednesday the rising indebtedness of Land Securities Capital Markets Plc (LSCM) combined with falling market values for UK property were increasing the risks of losses and that it had placed the AA ratings of the notes on CreditWatch negative.

"First, the UK commercial property markets have experienced significant market value declines," S&P said.

"Secondly, LSCM drew down approximately 1.1 billion pounds from existing bank facilities earlier this year, thereby increasing its total indebtedness." This money was then loaned on an unsecured basis to entities in the Land Securities Group, S&P added.

The loan-to-value ratio -- outstanding notes and similarly ranked bank debt versus the market value of the portfolio -- increased to 76.7 percent as of March 31, S&P said.

Land Securities Group has about 1.6 billion pounds of cash and 560 million pounds of unencumbered assets, S&P said.

"We understand it is the intention of Land Securities Group to reduce the leverage of LSCM, although LSG has made no firm proposal," S&P said.

The agency said it expected to make a decision on the rating by the middle of September. ($1=.6036 Pound) (Reporting by Jane Baird; Editing by Jon Loades-Carter)