Moody's Downgrades Goldman Sachs (GS) Long-Term Senior Debt Ratings to A1
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Moody's Investors Service downgraded the long-term senior debt ratings of Goldman Sachs Group Inc. (NYSE: GS) to A1 from Aa3, excluding FDIC-guaranteed debt. The Aa3 deposit ratings of Goldman Sachs' banking subsidiaries and all of its Prime-1 short-term ratings were affirmed. The outlook remains negative.
The downgrade of Goldman Sachs' senior debt to A1 reflects (1) the increased vulnerabilities that the ongoing credit market crisis has exposed in the model of Goldman Sachs and other wholesale-funded investment, commercial, and universal banks (see "Impact of the Credit Crisis on Moody's Rating Methodology and the Credit Profiles of Investment Banks" dated October 2008); (2) the likelihood of increased structural subordination for Goldman Sachs creditors relative to its bank-level creditors; and (3) a persistent difficult operating environment that will continue to challenge the firm. Tempering these issues, Moody's is now incorporating one notch of benefit to the firm's ratings for potential systemic support.
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