Moody's Says $105 Billion in
SIVs are `Worth Less'
Dec. 3, 2007 (EIRNS)—Investment rating service Moody's has announced it is reviewing the ratings on $105 billion worth of SIVs, in what Bloomberg calls "the biggest credit rating cuts since subprime mortgages." According to Moody's, the assets underlying the debt has collapsed from 71% (of face value) to 55%. These same "assets" (debt to you and me) were rated at 102% in June, just five months ago. The review of these SIVs (structured investment vehicles) was announced last Friday, Nov. 30, when Moody's cut the ratings on 20 SIVs worth $14 billion, which included many owned by Citigroup. In total, now, Citi has $65 billion either reduced or on review, and the Bank of Montreal has $19 billion in the same condition. This cut hits about one third of the total SIV market, currently "valued" at about $300 billion.
To understand exactly what this means, one of the SIVs downgraded to "not prime" last week, was Orion Finance, $50 million of whose bonds are owned by the state of Montana. Of the additional $105 billion under review, Montana owns $80 million, and Connecticut owns $300 million. The Montana Board of Investments reportedly has a total of $550 million, or 25% of its funds, invested in SIV related holdings. Connecticut's investment represents about 5% of its $5.8 billion Short Term Investment Fund, which it had invested in three funds, Beta Finance, Dorada Finance and Five Finance. The bonds affect every aspect of local life, from schools to fire and police protection.
State Senator Dave Lewis, of Helena, Montana, a member of the Legislative Audit Committee, told Bloomberg that, "This just reinforces the fact that we have a serious issue," adding that, "we may need a special session of the state legislature" to deal with the crisis.