UPDATE 1-S&P cuts NYSE credit rating, may cut further
(Adds action on LCH)
NEW YORK May 13 (Reuters) - Standard & Poor's cut its ratings on stock exchange operator NYSE Euronext (NYX.N)(NYX.PA) on Thursday, and said it may also cut LCH Clearnet after the NYSE said it would stop using the services of the clearing house group.
S&P lowered the NYSE's ratings one notch to AA-minus, the fourth highest investment grade, from AA, and said it may cut them again. It also said it may lower LCH from A-plus, the fifth highest investment grade.
NYSE Euronext said Wednesday it will stop using the services of the LCH Clearnet group from 2012 and start its own clearing houses for European securities and derivatives in London and Paris in late 2012.
"This transformational project, coupled with efforts to build a new derivatives clearinghouse in the U.S., signals a shift in management's risk tolerance at a time when outstanding debt remains very high" for its rating, S&P said in a statement.
NYSE Euronext has also been slow to improve its financial profile, in spite of better earnings and efforts to reduce debt, S&P said.
LCH Clearnet's earnings, meanwhile, may be hurt by the lost business.
"The loss of one of its largest clearing contracts will severely impact LCH.Clearnet's business in France and to some extent in its U.K. business too. This pressure will likely add to heightened competitive forces from other European clearinghouses, and falling clearing tariffs and trading volumes," S&P said.
S&P added that the NYSE's downgrade is not related to the market sell-off on May 6, saying the exchange "followed its rules in instituting liquidity replenishment points, and there is no evidence of trading systems failure." (Reporting by Karen Brettell; editing by Jeffrey Benkoe)
- Tweet this
- Share this
- Digg this