Fitch Ratings last Thursday took action on a number of municipal bonds with liquidity facilities provided by Morgan Stanley and Morgan Stanley Bank NA after downgrading the companies last week.
Fitch downgraded the long- and short-term issuer default ratings of Morgan Stanley to A/F1 from AA-/F1-plus and the ratings of Morgan Stanley Bank to A-plus/F1 from AA-minus/F1-plus. The short-term ratings on 21 municipal bond issues with liquidity facilities provided by the companies fell to F1 from F1-plus.
Fitch also downgraded the short- and/or long-term credit ratings of a number of tender-option bonds. In TOB trusts that had credit enhancement provided by Morgan Stanley, Fitch took into account the ratings of underlying bonds.
Morgan Stanley received a boost earlier this week when it announced it closed on its deal to receive a $9 billion investment from Mitsubishi UFJ Financial Group. Although Fitch acknowledged the deal will help Morgan Stanley, the rating agency said the capital infusion will not help alleviate the pressures weighing on Morgan Stanley's core businesses.
"Customers are migrating away from its premier prime brokerage business due to deleveraging and concerns about the protection of client assets," Fitch said. "Morgan Stanley's investment banking activities are also facing economic headwinds, as is its commodities trading business."
Following its own move to place Morgan Stanley's A1 rating on watch for downgrade, Moody's Investors Service Friday placed on negative watch the rating of two series of gas revenue bonds on which the bank acted as the gas purchase guarantor. The move affects $758 million of Series 2007A and 2007B Northern California Gas Authority No. 1 revenue bonds.
Elsewhere, Standard & Poor's took action on 330 bonds with letter-of-credit support from Wachovia Bank NA. Standard & Poor's last week moved to positive from developing the CreditWatch status of Wachovia's long-term ratings on news that Wells Fargo & Co.'s acquisition of Wachovia Corp. would proceed.
Standard & Poor's placed on CreditWatch positive the ratings of 300 issues on which Wachovia provided a letter of credit or standby purchase agreement.
Standard & Poor's removed from CreditWatch negative the rating of nine issues Wachovia backed and on which Waste Management Inc. was the obligor. The rating reflects that Standard & Poor's recently removed both companies from negative watch.
The rating agency also removed from developing CreditWatch the ratings of 10 other issues, five of which were insured by Ambac Assurance Corp.
Standard & Poor's also affirmed the rating of 11 other issues. It said it expects ratings changes to Wachovia will not impact the ratings on these issues, because 10 have joint support from the obligors and the final one has a long-term rating fixed below Wachovia's.
