S&P Downgrades REIT-Linked CDO Tranches

Standard & Poor's Ratings Services has lowered its ratings on 46 tranches from nine U.S. trust preferred collateralized debt obligations backed in part by trust preferred securities issued by mortgage real estate investment trusts.S&P also removed from CreditWatch with negative implications 39 CDO ratings. In addition, it affirmed the ratings on five tranches from two trust preferred CDOs and removed them from CreditWatch negative. The downgrades primarily reflect the weakening credit quality of the mortgage REIT assets in the CDO collateral pools, the rating agency said, noting that many REITs and other mortgage originators and purchasers have recently had trouble getting funding to finance their operations because of mortgage market conditions. Including the latest downgrades, S&P said it had downgraded 121 tranches from 27 cash flow and hybrid CDOs with exposure to U.S. residential mortgage-backed securities (and other securities) that have been hit with negative rating actions since July. In addition, the ratings of 117 tranches from 40 cash flow and hybrid CDO transactions are still on CreditWatch with negative implications. S&P can be found online at http://www.standardandpoors.com.