S&P may cut $14 billion of subprime debt, eyes CDOs

By Walden Siew

NEW YORK (Reuters) - Standard & Poor's on Friday said it is reviewing $14 billion of subprime-related debt for a ratings cut and may act on related collateralized debt obligations within "days," the rating company said.

S&P took the action due to rising delinquencies on higher quality mortgage loans known as "Alt-A loans," which are a step higher in quality than subprime mortgages.

The rating company placed its ratings on 1,887 classes of residential mortgage-backed securities backed by Alternative-A mortgages originated in 2006 and 2007 on review for a ratings downgrade.

Some of this debt may impact complex structures known as CDOs, asset-backed commercial paper and structured investment vehicles, which are also under review, S&P said.

"Where appropriate, we will take action on the affected CDO classes within the next several days," S&P said.

S&P also said it has completed its global review of its rated asset-backed commercial paper conduits with exposure to the related U.S. residential mortgage securities, confirming that the ratings on the ABCP conduits are not adversely affected by the rating actions on Friday.

The securities most vulnerable to rating cuts are rated "BBB," the second lowest investment grade, and lower rating categories, S&P said.

(Editing by Diane Craft)