Moody’s Investors Service today downgraded 15 structured investment vehicles with a total of $101 billion of debt securities affected by deteriorating market value due to illiquidity. The move is part of a review of $130 billon of SIV funding programs that Moody’s has completed.
Citigroup topped the list of affected firms, with $64.9 billion of programs from six of the seven SIVs the bank manages downgraded or placed on negative watch. Bridgewater Capital and HSBC were the only other SIV sponsors with multiple vehicles facing downgrades, with two apiece. Citi officials did not return a call and representatives from HSBC and Bridgewater could not immediately be reached.
In addition, four SIVs totaling $28 billion were placed on watch for downgrade. Just one $400 million SIV had all of its ratings affirmed. Moody’s spokesmen did not return calls for comment.
The rating actions come as outstanding asset-backed commercial paper in the U.S., which many SIVs use to fund longer-term investments, shrank to about $800 billion as of Wednesday. That is down from an all-time high of about $1.2 trillion in August, according to The Depository Trust Company. Some market participants predict it could fall to $600 billion in the next year (TS, 10/24).