Standard & Poor's Could Downgrade $578B of Collateralized Debt Obligations
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Standard & Poor's said it may downgrade about $578 billion of collateralized debt obligations, or CDOs, backed by corporate debt as the rating agency changes its methodology on how it rates the securities.
About 4,790 tranches of CDOs could be put on watch for downgrades because of the changes.
CDO that will be given the top AAA must be able to withstand default rates seen during "extreme macroeconomic stress, such as the Great Depression," S&P said. Those with a BBB ratings would have to withstand the highest default rates that have occurred during the past 28 years.
About 4,790 tranches of CDOs could be put on watch for downgrades because of the changes.
CDO that will be given the top AAA must be able to withstand default rates seen during "extreme macroeconomic stress, such as the Great Depression," S&P said. Those with a BBB ratings would have to withstand the highest default rates that have occurred during the past 28 years.
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