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SandP issues rating statement on several corporates
NEW YORK (10/2/08)--Saying that "overall we believe the credit union sector/industry remains quite healthy," Standard & Poor's (S&P) Rating Services reported Tuesday it has adjusted the ratings of four corporate credit unions. S&P's placed two corporates--Western Corporate FCU (WesCorp) and Members United FCU--on a CreditWatch Negative. It revised its outlook on Southeast Corporate FCU and Southwest Corporate FCU to negative from stable. S&P noted that the overall corporates "have a comparatively low-risk profile, strong liquidity, and exhibit adequate financial profiles. "A testament to the overall and individual health of the corporates is that despite the unprecedented challenges of the prolonged credit crisis, the rated corporates have been able to not only hold their structured securities portfolios, but to do so without compromising their ability to perform their key roles as investment vehicles and liquidity providers to their members," said S&P. The ongoing credit crisis and longer-term structural changes to the industry have put downward pressure on several ratings, S&P added. The four corporates issued statements saying they were pleased with the overall reaffirmation of their ratings, given the economic environment. "Although S&P has placed WesCorp on watch negative, it's reassuring to know they continue to view our business and financial profiles, and particularly our liquidity, as solid," said Jim Hayes, WesCorp senior vice president and chief financial officer. He pointed out that the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) are preparing to propose additional interpretative guidance on fair value measurement under U.S. generally accepted accounting practices later this week. "We anticipate any new clarifications will have a positive impact on S&P's independent review of our portfolio," Hayes said. Members United Corporate FCU President David A. Preter, in a letter to members posted on the corporate's website, noted, "During this unprecedented market upheaval, it is not surprising that ratings agencies are taking a cautious view of all financial institutions." Members United carries the highest short-term rating given by S&P: A-1+ and that rating has not changed. Preter said, "S&P acknowledged its belief that the majority of our investment portfolio remains sound, and that our unrealized losses overstate expected future losses." He noted S&P expressed concerns about a pending write-down of Lehman senior debt and "the potential for additional losses from our mortgage securities portfolio. "During this especially turbulent time, it is gratifying that Members United's ratings were not downgraded--but rather placed on CreditWatch Negative pending further review," he said. Robert F. Schleiter, executive vice president of Southeast Corporate FCU, told News Now, "We are very pleased that Standard & Poor's reaffirmed our ratings, given the current stress in the markets." John Cassidy, president/CEO of Southwest Corporate, said in a message on the corporate's website, that S&P reaffirmed its ratings at AA (senior obligation) and A1+ (commercial paper). "Southwest Corporate views S&P's affirmation of our ratings during this period of unprecedented stress in the credit markets as a positive confirmation," Cassidy said. "The change in outlook was not unexpected as such actions are now common for investors in mortgage-backed securities and followed Fitch Ratings' similar change in June." He noted that the reason for the change is to reflect concern over the corporate's exposure to potential realized investment losses. "It is important to note that S&P characterized Southwest Corporate's potential losses as manageable, and this opinion echoes the message we have communicated to our members over the past year."
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