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From: ldo79	2/5/2008 9:39:59 PM
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we might/maybe/could squeeze a turd out if we grunted real hard........... Fitch set to downgrade safest AAA-rated CDOs By Paul J Davies February 6 2008 02:00 Fitch Ratings is set to downgrade some of the safest AAA-rated slices of complex pools of corporate credit derivatives by up to five notches following a review of its rating criteria for collateralised debt obligations of company debt. The agency yesterday published a draft of its new methodology for market feedback but expects to implement the changes on March 31 and then begin issuing ratings to new and existing deals. The move is part of a wave of changes to all kinds of structured finance ratings being pursued by the third largest ratings agency, which fits in with broad industry efforts to restore faith in these ratings - and in the agencies themselves - after months of credit market turmoil. A sharp criticism of the ratings agencies from both investors and regulators has been that ratings for structured finance products do not mean the same as those for ordinary corporate or sovereign debt - that a AAA-rated mortgage-backed bond, for example, is not the same risk as a AAA-rated unsecured bond from a company. Moody's this week proposed a new system for rating complex credit products that would rely on numbers rather than letters, but that would still maintain the same number of categories. However, some in the market believed this would be more confusing than helpful. John Olert, head of global structured credit at Fitch, said: "The intention is to produce CDO ratings that perform similarly in terms of default risk and ratings migration with the market's expectation for other asset classes. This is particularly true for AAA and other highly rated CDO tranches." Ken Gill, head of European CDOs at Fitch, added that the agency was responding to some of the criticisms that agencies have faced over recent months. "With a senior structured finance rating we have had to ask, is it a consistent representation of credit risk, and that's where we're doing a lot of soul-searching." The agency intends to put more emphasis on the role of credit committees rather than quantitative models when deciding ratings, which should help detect when banks that structure deals are gaming the rules or pushing the boundaries of what ought to qualify for a certain rating. Separately, Standard & Poor's said it was changing its correlation and recovery assumptions for CDOs of structured finance such as mortgage-backed bonds and other CDOs. The moves are likely to lead to further downgrades for these kinds of deals.

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