A Bloomberg story just appeared Moody’s May Downgrade Up to $450 Billion of Bank Debt:
Moody’s Investors Service is reviewing about $450 billion of bank hybrid and subordinated notes for possible downgrade after changing the assumptions underlying its ratings of the debt.
Some 775 securities issued by 170 “bank families” in 36 countries are affected, the New York-based risk assessor said in an e-mailed statement. Half the hybrids may have their ratings lowered by three to four grades, 40 percent may be cut by one or two grades and the remainder may be lowered by five steps or more, it said.
Moody’s reviews come after it stopped assuming holders of hybrids, which mingle characteristics of debt and equity, would benefit from government support for troubled lenders after the global financial crisis proved that wasn’t the case. The new system expects regulators to treat them more like equity, and takes into account the risk that banks might be forced to suspend coupon payments on their lower-ranked debt.
There does not appear to be a press release or notice on the Moody’s website yet … all I found was a July 28 press release saying that they expected to finalized the methodology in September, which was part of the same story reported on PrefBlog in June.
But then I had a look at their ratings list for Bank of Montreal and hey, looky-looky! All the prefs have “Possible Downgrade, 18 NOV 2009” under “Watch Status”. It the same thing for BNS, by the way, so the notation is not related to the extant Moody’s Watch on BMO.