Moody's says may cut Gordian Knot's Sigma

LONDON, Feb 27 (Reuters) - Moody's Investors Service on Wednesday said it may cut the top ratings on Sigma Finance, a limited purpose finance company similar to a structured investment vehicle (SIV) run by asset manager Gordian Knot.

Moody's said it might cut $26.5 billion of medium-term note debt and $550 million of commercial paper currently rated Aaa and Prime-1 issued by Sigma, which as of Feb. 15 had $41 billion in assets.

SIVs have run into problems as their access to funding has dried up at the same time as the value of their assets -- mainly bank debt and asset-backed securities -- has fallen, causing them in some cases to hit triggers that force them into receivership.

Sigma, the largest non-bank sponsored structure of this type, has different features to SIVs and does not contain market-value triggers. It has also made more use of longer-term funding than other such vehicles and has used securities repurchase agreements as a source of funding.

Moody's said, however, that it might cut Sigma's long-term rating into the Aa category and its short-term rating to Prime-2 due to the funding challenges it faces.

"Overall market price deterioration, continued inability to issue senior debt and reliance on repos have increased the company's risk profile," the agency said.

It said Sigma had reduced leverage, however, as the nominal value of its asset portfolio had been reduced to $41 billion from $57 billion. The average asset price has fallen to 96.99 percent of face value from 100.2 percent as of July 2007.

(Reporting by Richard Barley; Editing by Erica Billingham)