Monday, August 17, 2009
S&P, About Face
"A surprise ratings flip-flop by Standard & Poor's cast a cloud of uncertainty over the $700 billion market for commercial mortgage-backed securities and further tarnished the ratings firm's credibility. ... The imbroglio began in May when S&P warned it might downgrade billions of dollars of triple-A rated CMBS bonds because of proposed changes in its ratings methodology. ... A week ago, S&P followed up on its warning and cut the creditworthiness on 19 classses of a $7.6 billion deal that is viewed by market participants as a benchmark for pricing CMBS bonds. Some of the classes were downgraded all the way from triple-A to just one notch above 'junk.' But on Tuesday S&P did an about-face. The New York-based ratings company said in a statement that it restored some of those bonds to triple-A because of its 'recently updated criteria' for assessing losses on top-ranked CMBS bonds. ... The $7.6 billion benchmark deal at the center of the ratings controversy is commonly known as GG10. It was sold by RBS Greenwich Capital and Goldman Sachs Group Inc. in 2007", Lingling Wei and Anusha Shrivaastava at the WSJ, 23 July 2009, link: http://online.wsj.com/article/SB124830588436973941.html.
It's good to see S&P knows who is its boss. What new information came to S&P's attention to cause it to change its rating? Well S&P?