NEW YORK — In its statement on reaffirming U.S. Central's AAA rating, but changing its outlook from stable to negative, Standard & Poor's pointed to U.S. Central's subprime and other mortgage related securities as a reason for concern.
"The outlook revision reflects increased concerns about USC's exposure to subprime, home equity, and other MBS, the market for which is currently facing a severe liquidity drought brought on by concerns over fundamental deterioration in the housing market," said S&P Credit Analyst Robert. B. Hoban. "USC's exposure to nonprime mortgages is outsized relative to its capital and resulted in a meaningful yet manageable net loss in the third-quarter 2007."
S&P said although almost all of U.S. Central's MBS are highly rated, its high capital leverage has "magnified its exposure into a considerable portion of capital." S&P said it is concerned about the lower-rated portion of the portfolio given the difficult housing market.
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