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Moody's May Cut Ratings on 300 Hybrid Bonds Under New Criteria
Mai 0918919278 SG
By Sebastian Boyd
Nov. 22 (Bloomberg) -- Moody's Investors Service may cut credit ratings on 300 so-called hybrid bonds after a review of its criteria for assessing the securities.
Hybrid bonds combine elements of equity and debt and often allow the issuer to suspend or cancel interest payments without defaulting. In the past, Moody's has rated the bonds one or two levels below its grade for the company.
The New York-based rating company yesterday revealed proposals to measure the probability of companies deciding to cancel interest payments on bonds. The new methodology may mean Moody's cuts its ratings on debt sold by Rueil-Malmaison, France- based Vinci SA, the world's biggest construction company, and Boulogne-Billancourt, France-based Thomson SA, the world's biggest maker of television set-top boxes, Dresdner Kleinwort said in a note published today.
``Without examining every security in detail, it is difficult to determine the exact number of expected rating changes, but an initial survey indicates that ratings could change for roughly 300 securities if the proposal is adopted,'' Moody's said in a document on its Web site.
The extra yield, or spread, over the euro asset-swap rate investors demand to buy Vinci's hybrid bonds rose 11 basis points today to 252 basis points, according to RBC Capital Markets. The asset-swap rate is a measure of the cost of swapping between fixed and floating interest rate payments and is used to measure the cost of company borrowing