Fitch Worries About Unrated Debt

November 15, 2010 by · Leave a Comment
Filed under: Financial Crisis, The Rating Agencies 

The number of high profile companies that have been selling unrated bonds or structured securities has been growing since the credit collapse in 2008. Formerly unrated investments were the purview of high-risk junk bond issuers.

The Wall Street Journal quoted Peter Sack of Credit Suisse’s mortgage-backed securities structuring group as claiming, “Two years ago, deals like this would have been inconceivable…Now they are a viable option.”

Whereas getting a risk appraisal from the leading ratings agencies was once automatic, in the wake of the credit crisis many of their ratings were shown to be unreliable. This has rattled investor confidence to the point that in some instances issuers have concluded that their evaluations are superfluous or worse, worthless.

As long ago as August 2009 Bob Kunze-Concewitz, chief executive of Italy’s Gruppo Campari, was quoted as saying, “Our reputation is good….I don’t think a rating would have mattered that much.”

Fitch Ratings – London in a recent report warns investors about the risk of unrated issues.  They also indicate that approximately half of the non-rated issuers in 2009 could have been investment-grade.

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