In an unusual move, Moody's Investors Service has withdrawn the ratings of a seasoned collateralized debt obligation for reasons other than the notes having been redeemed. The rating agency recently withdrew its rating on the A-4 class of Mountain Capital, a $473 million securitization of corporate debt originally sold in 1999 and brought to market by Bear Stearns, according to Gus Harris, a managing director in CDOs at Moody's. He says the move was done at the request of the issuer, the former Fuji Bank Ltd., a Japanese bank that is now part of Mizuho Financial Group. He declined further comment. David Ritchie, the banker at Bear Stearns responsible for the deal, did not return a call and officials from Mizuho in New York were unable to comment by press time.
It is rare for issuers to drop ratings from an outstanding transaction because the move may raise a red flag to investors, according to CDO market officials, with one saying, "It looks a little bit curious." However, they add that since other classes of Mountain Capital are meeting their over-collateralization tests and continue to carry third-party ratings, the removal of a rating on a single class is more likely because the bank, or another investor, acquired the bonds in the secondary market and does not require a rating. In this case, removing a rating on a class would incrementally increase the excess spread supporting it, according to one researcher.