Monday, December 03, 2007

Moody's to Review Rating of BMO's SIV

The Globe and Mail, Tara Perkins, 3 December 2007

Bank of Montreal stock fell nearly 3 per cent Monday on news that credit-rating agency Moody's Investors Service is cutting or reviewing ratings on $19.1-billion (U.S.) worth of securities in the bank's structured investment vehicle, Links Finance Corp.

"Links Finance's net asset value declined to 78 per cent from 94 per cent since Moody's review of September 5th," the rating agency said in a note Friday. The current asset value is inconsistent with Aaa/Prime-1 ratings, it added.

"Moody's will consider possible mitigating factors and expects to conclude its review within one week," it said.

A spokesman for BMO said the bank feels that Links' current rating reflects its underlying strong asset quality and the plans of the bank and other stakeholders to address the issues the SIV faces given the current state of the SIV market.

Last week, BMO said it had bought about $1.25-billion of senior notes out of its SIVs thus far. It has capped its participation at about $1.6-billion.

In addition to Links Finance, the bank has Parkland Finance Corp.

Moody's actions Friday came as the agency completed part of its review of the SIV sector. It confirmed, downgraded or placed on review for possible downgrade 79 debt programs worth about $130-billion (U.S.) that are part of 20 SIVs.

"The rating actions Moody's has taken today are not a result of any credit problems in the assets held by SIVs, but rather a reflection of the continued deterioration in market value of SIV portfolios combined with the sector's inability to refinance maturing liabilities."