S&P slashes mortgage-backed CDO debt on liquidations

NEW YORK, Dec 19 (Reuters) - Standard & Poor's on Wednesday said it has received notices of liquidation from the trustees of three collateralized debt obligations backed by residential mortgages, causing deep downgrades including some "AAA"-rated notes being cut to "CCC-minus."

The ratings cuts reflect "the impact on the transactions of a potential liquidation of the collateral at the current depressed market prices," S&P said in a statement.

S&P said it has received notices of an intent to liquidate from the trustees of Tricadia CDO 2007-8 Ltd, TABS 2007-7 Ltd and TABS 2006-5 Ltd. It did not give a dollar amount for the debt affected.

The ratings cuts affect 17 classes of notes from the three deals, and include several formerly "AAA"-rated tranches being cut to junk, in some cases to as low as "CCC"-minus, nine steps below investment grade.

Other tranches have been cut to "CC," ten steps below investment grade, S&P said.

"The controlling class' election to liquidate the collateral at this time may result in losses for all classes of notes," S&P said. "Therefore, today's rating actions are more severe than would be justified based solely on the credit deterioration of the underlying collateral."

Earlier this month S&P said the proceeds from the liquidation of a Credit Suisse deal were insufficient to pay back note holders. On average, the assets and credit default swaps liquidated by the deal returned less than 25 percent of their par value, S&P said. For details, see [ID:nN05434649] (Reporting by Karen Brettell; Editing by Theodore d'Afflisio)