(Adds details throughout, Moody’s analyst comment, changes dateline, adds LONDON)
By Karen Brettell and Richard Barley
NEW YORK/LONDON, Nov 7 (Reuters) - Moody’s Investors Service said it cut or may cut ratings on $33 billion of debt — 10 percent of the total outstanding — of structured investment vehicles battered by declining asset values and lack of access to funding.
The potential ratings cuts affect 28 debt programs from 16 SIVs. They include debt issued by three Citigroup (C.N) SIVs — Beta, Centauri and Dorada; HSBC’s (HSBA.L) two SIVs, Asscher and Cullinan; and WestLB’s [WDLG.UL] Harrier and Kestrel vehicles, Moody’s said on Wednesday.
The agency said it would complete its review for downgrade within two weeks.
“The sector continues to experience an enormous amount of liquidity pressure. They also face declines in their portfolio market values,” Henry Tabe, managing director in Moody’s SIV team, told Reuters.
“So in the face of the kind of pressure that the sector faces, it’s only natural that the ratings come under pressure,” he said. “There are certain actions that the managers can take to convince us that the notes we’ve placed on review should not be downgraded.”
These include gaining support from sponsors, asset sales at higher prices, restructuring proposals, or potentially support from a proposed fund that would help the vehicles, he said.
Citigroup, Bank of America (BAC.N) and JP Morgan Chase said in October they would set up a fund, called Master Liquidity Enhancement Conduit, or M-LEC, to help the ailing vehicles, but few details have emerged.
“I’m not aware that any vehicle is sitting on its hands and waiting. On the contrary, people are pursuing individual restructuring proposals,” Tabe said.
He said M-LEC could still have a positive impact, and rejected the idea that the two-week review period placed more pressure on the SIVs.
“Our role really is to give investors as accurate a picture as possible of where the rating should be at any point in time. We’re not mandated to look at economic, political consequences or any other kind of consequences to our ratings actions,” Tabe said.
Moody’s said Beta’s net asset value had fallen to 75 percent from 87 percent since its last review on Sept. 5. Centauri’s fell to 76 percent from 85 percent, Dorada’s to 77 percent from 87 percent, Asscher’s to 71 percent from 84 percent, and Cullinan’s to 69 percent from 78 percent.
“The ongoing liquidity crisis facing SIVs has continued almost unabated since September 5th,” Moody’s said in its statement. (Reporting by Karen Brettell; Editing by Dan Grebler)