Standard & Poor’s downgraded 259 European asset-backed securities after the New York-based ratings firm cut the ranking of countries including France, Italy and Spain.
S&P cut 159 bonds backed by Italian loans, 81 tied to Portuguese assets, 17 linked to French borrowers and two on Spanish debt, it said in a statement today.
Banks create asset-backed securities by pooling home and consumer loans and selling them to investors as notes with varying ratings and returns. The bonds’ rankings can’t be more than six steps higher than the sovereign rating if the country is investment grade, or five levels for speculative-grade nations, according to S&P.
“Following the rating actions that we took on 16 eurozone sovereigns on Jan. 13, 2012, the maximum structured finance ratings that we would assign under our criteria have changed for Italy and Portugal,” S&P said in the statement.
Italy’s credit rating was cut two levels to BBB+ by S&P this month, while Portugal was downgraded to junk status.
S&P confirmed ratings on 81 portions packaging assets exposed to Belgium, Germany, Ireland and the Netherlands.