Source : The Business Times, September 1, 2007
(HONG KONG) DBS Group Holdings Ltd's Singapore banking unit is unlikely to have its credit ratings downgraded because of investments in collateralised debt obligations (CDOs), Standard and Poor's (S&P) said yesterday.
DBS Bank Ltd, Singapore's biggest, said on Monday that it had $2.4 billion at risk from collateralised debt obligations, more than earlier stated, after an entity it manages was forced to seek funding.
The bank stands to lose no more than $1.1 billion through its so-called conduit, called Red Orchid Secured Assets (Rosa), Standard and Poor's said in an e-mailed statement. Standard and Poor's has a AA-minus rating on DBS Bank's long-term foreign-issuer credit status, the fourth-highest investment grade.
Most of Rosa's assets are rated AAA, or the highest investment grade, according to Standard and Poor's. None are 'directly exposed' to the US sub-prime mortgage market, DBS has said.
Rosa needed financial help because of turmoil in credit markets caused by fallout from US sub-prime mortgage defaults, according to DBS. Rosa, an off-balance sheet structure called a conduit, held $1.1 billion of CDOs, which are bundles of bonds and loans.
Sub-prime fallout has roiled global markets as investors dump riskier assets and lenders tighten credit. S&P replaced its president on Thursday after lawmakers and investors criticised the company for failing to judge the risks of securities backed by sub-prime mortgages.
The crisis led US Senate Banking Committee chairman Christopher Dodd to call on credit rating companies to explain why they assigned 'AAA ratings to securities that never deserved them'. -- Bloomberg
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