GSE Preferred Stock Downgraded

The preferred stock ratings of Fannie Mae and Freddie Mac have been downgraded by the three major rating agencies in the wake of Sunday's announcement of a federal takeover of the government-sponsored enterprises. The GSEs' preferred stock ratings were downgraded from BBB-minus to C by Standard and Poor's Ratings Services, from Baa3 to Ca by Moody's Investors Service, and from BBB-minus to C/RR6 by Fitch Ratings. In addition, S&P affirmed its long-term senior unsecured debt ratings on Fannie and Freddie at AAA and A-1-plus, respectively, with a stable outlook. It also lowered its risk-to-the-government standalone issuer credit ratings from A-minus to R (regulatory supervision) and withdrew the ratings. S&P said its affirmation of the senior unsecured debt ratings "reflects the explicit government support under the terms of the conservatorship and Treasury's establishment of a preferred stock purchase agreement," the rating agency said. Moody's affirmed its senior and subordinated debt ratings on the GSEs at Aaa and Aa2, respectively. Fitch affirmed its long- and short-term Issuer Default Ratings and senior debt ratings on the GSEs at AAA and F1-plus, respectively, and assigned a stable rating outlook to the long-term IDRs. The downgrade of the GSE preferred stock "reflects the subordination of the preferred to any Treasury interest, and interest payments are unlikely to resume in the foreseeable future," Fitch said. The rating agencies can be found online at http://www.standardandpoors.com, http://www.moodys.com, and http://www.fitchratings.com.