“Cos Anticipated Subprime Defaults Will Discourage Them from Selling Loan-Backed Bonds”
(Maguire Properties Inc, the biggest office landlord in downtown Los Angeles, is taking a hit as well)
(David Wilson)
THERE'S no shortage of collateral damage in the US stock market from the collapse of subprime mortgage lenders. Shares of Moody's Corp and McGraw- Hill companies, the parent of Standard & Poor's, are falling in anticipation that subprime defaults will discourage companies from selling loan-backed bonds. Any slowdown would mean less demand for the debt ratings that Moody's and S& P provide.
Maguire properties Inc, the biggest office landlord in downtown Los Angeles, is taking a hit as well. The real estate investment trust's tenants include New Century Financial Corp, the second-largest lender to home buyers with relatively low credit ratings.
New Century, based in the Los Angeles suburb of Irvine, California, lost its New York Stock Exchange listing on Tuesday after failing to meet creditors' demands for funds. Accredited Home Lenders Holding Co, a competitor, said on Tuesday it would seek more financing after bankers made a similar request.
The fallout from the industry's travails has moved far beyond the brokerage firms and banks that are active in the subprime business - maybe too far.
Moody's has dropped 20% and McGraw-Hill has declined 11 % since February 8. Subprime lenders began sinking the day after New Century said it would report a loss and HSBC Holdings plc said it would set aside more for loan losses than analysts anticipated to compensate for defaults.
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