Post by Stan Rosenberg on Nov 7, 2010 6:29:39 GMT 4
Moody's Downgrades 221 Municipal Letters Of Credit Bonds
NEW YORK (Dow Jones)--Moody's Investors Service on Wednesday downgraded the long-term rating of 221 municipal bond issues backed by letters of credit, or LOC, from various providers.
The rating firm, a unit of Moody's Corp. (MCO), attributed the downgrades to a change in the way it rates debt that is jointly supported by the issuer and credit letter provider, where both are equally obligate to pay principal and interest.
That approach applies to fewer than 18% of Moody's rated LOC-backed transactions in the public finance sector.
Letter of credit have become more expensive for municipal issuers to obtain as fewer banks are willing to provide them because of the recent credit freeze. Banks also have been downgraded in many instances beneath acceptable levels required for them to act as counterparties in a transaction.
Of the 221 downgrades, Moody's said 163 were by one notch, 43 two notches and 15 three notches. Four ratings were held as is, and no short-term ratings connected with the bonds were affected.
The firm said that some transactions supported by letters of credit from the California Public Employees' Retirement System or the California State Teachers' Retirement System reflected the conclusion of a review that was started last December, when those programs were downgraded to Aa3. A listing of those transactions wasn't immediately available.