Moody's Cuts Ratings on CDOs Tied to Subprime Bonds

Moody's Investors Service cut the ratings of collateralized debt obligations tied to $33 billion of subprime mortgage securities it downgraded this month, a decision that may force owners to mark down the value of their holdings.

Securities with ratings as high as AAA from at least 45 CDOs were either cut or put on review for a downgrade, according to individual statements distributed today by the New York-based ratings company. Moody's didn't release a summary.

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Moody's yesterday lowered $873 million of the safest types of AAA rated securities from a CDO created this year by New York- based Vertical Capital LLC to one level below investment grade. The ratings company today downgraded $255 million in AAA notes issued by Static Residential CDO 2006-B Ltd. by at least seven levels to three levels above junk, or non-investment grade.

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Connecticut Attorney General Richard Blumenthal said today he is investigating Moody's, S&P and Fitch for breaching antitrust rules as investigations into credit ratings companies widen. The U.S. Securities and Exchange Commission and the states of New York and Ohio are also probing the ratings companies.

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Moody's should have aggregated information about the downgrades, said Josh Rosner, managing director at New York-based investment research firm Graham Fisher & Co.

``It suggests that they're understaffed and under-automated if they have to do this in such small batches,'' he said.