Moody's cuts Bear Stearns debt on quarterly loss
NEW YORK (Reuters) - Moody's Investors Service on Thursday cut its ratings on Bear Stearns Cos BSC.N after the investment bank recorded a much-bigger-than expected quarterly loss from writing down the value of mortgage-backed securities.
It was the first loss in the history of the company, which decided top executives would not receive bonuses. Bank of America analyst Michael Hecht said Bear's smaller bonus pool could lead to attrition and hinder a strong rebound.
"These write-downs overwhelmed the earnings power of Bear's otherwise strong, but less well-diversified franchise," Moody's said in a statement.
Moody's cut Bear Stearns one notch to "A2," the sixth highest investment grade, from "A1." The outlook is stable, indicating an additional cut is not anticipated over the next 12-to-18 months.
"Although these losses occurred during a market inflection point, their size, relative to Bear's earnings, also indicates an increase in the firm's risk appetite," Moody's said. Bear is also exposed to risks in its commercial real estate portfolio, the rating agency said.
The cost to insure Bear's debt with credit default swaps was little changed on Thursday at 181.5 basis points, or $181,500 per year for five years to insure $10 million in debt.
(Reporting by Karen Brettell;Editing by Diane Craft)
