U.S. Entities And Issues Suffer Knock-On Effects Of U.S. Government's CreditWatch Negative
|Publication date: 15-Jul-2011 19:50:13 BST|
(Editor's Note: This article, published earlier today, incorrectly stated the number of U.S. structured finance transactions and funds affected. A corrected version follows.)
NEW YORK (Standard & Poor's) July 15, 2011--Standard & Poor's Ratings Services is in the process of putting a number of U.S-based entities with direct links to, or reliance on, the federal government on CreditWatch with negative implications after yesterday's placement of the sovereign credit ratings on the United States of America on CreditWatch negative. Among the entities and specific debt issues suffering the downstream effect of yesterday's action are certain 'AAA' rated insurers; clearinghouses and central securities depositories; select 'AAA' rated government-related entities (GREs); debt issued by financial institutions under the Temporary Liquidity Guarantee Program (TLGP); and certain fixed-income funds, exchange-traded funds, and hedge funds, as well as local government investment pools, and unit investment trusts. The ratings on U.S.-based 'AAA' rated state governments and nonfinancial corporate issuers are unaffected. The action on the U.S. government's 'AAA' long-term and 'A-1+' short-term ratings reflects our view of two issues: the failure to raise the federal debt ceiling so as to ensure that the government will be able to continue to make scheduled payments on its obligations, and our view of the likelihood that Congress and the Obama Administration will agree upon a credible, medium-term fiscal consolidation plan in the foreseeable future. (See "United States Of America 'AAA/A-1+' Ratings Placed On CreditWatch Negative On Rising Risk Of Policy Stalemate," published July 14, 2011.) As it stands, we see at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next three months-–by one or more notches, into the 'AA' category–-if we conclude that Washington hasn't reached agreement on the latter of these two issues. In addition to placing U.S. insurance groups' long-term counterparty credit and financial strength ratings, as well as related issue ratings, on CreditWatch negative, we are doing so for the 'AA' ratings on $5.75 billion of surplus notes issued by three of the affected insurers. We factor direct and indirect sovereign risks such as economic volatility, potential currency devaluation, and investment portfolio deterioration into our financial strength ratings. As per our criteria, the sovereign local currency rating constrains our financial strength ratings on insurers. We are also placing on CreditWatch negative the ratings of 125 FDIC-guaranteed 'AAA' rated debt obligations issued by 30 financial institutions under the TLGP, as well as eight federal leases and certain power-generation entities linked to the federal government. Of the 206 rated funds managed in the U.S., Europe, and Bermuda, we are taking action on 73 of these because of their significant exposure to the U.S. sovereign credit ratings, either through direct or indirect investments in U.S. Treasury and U.S. government agency securities. We are also placing the ratings on 604 U.S. structured finance transactions on CreditWatch negative. These transactions had an original issuance amount of $373.67 billion-–or less than 3% of the structured finance transactions we rate globally. Most structured finance securities are supported by collateral whose credit quality is not directly linked to the sovereign rating of the U.S. Standard & Poor's will publish articles detailing the specific entities and issues that are being placed on CreditWatch negative. Related Research "Special Report: U.S. Negative CreditWatch Placement And The Knock-On Effects, " published July 18, 2011
Standard & Poor's, a part of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of credit ratings. With offices in 23 countries, Standard & Poor's is an important part of the world's financial infrastructure and has played a leading role for 150 years in providing investors with information and independent benchmarks for their investment and financial decisions. For more information, visit http://www.standardandpoors.com.
|Ratings Quality:||Curtis Moulton, Managing Director, New York (1) 212-438-2064;|
No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P's opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: email@example.com.
Contact Client Services