According to Bloomberg, here is at least one instance of a CDO that was downgraded from AAA all the way down to CCC. This seems a little extreme even given the excesses of the derivatives markets. Are things really *that* bad?
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSEguZCZ9ZpY --------------------------------snip Last week, Standard & Poor's butchered the ratings on $3.2 billion of debt from structured investment vehicles spawned by Solent Capital Partners LLP in London and Avendis Group in Geneva. About $254 million was slashed from the top AAA grade to CCC+ and CCC -- slides of 16 and 17 levels, triggered by their investments in mortgage-backed bonds. Think about that for a second. You left the office Tuesday owning a AAA rated security. By the time you got back to your desk on Wednesday morning, it was eight steps below investment grade in a category S&P defines as ``currently vulnerable to nonpayment.'' Try explaining that to your pension-fund trustees. The rating companies are sifting through the billions of dollars of repackaged bonds and structured investment funds they graded in recent years. You can bet the world's biggest and smallest banks are also panning for risk in the structured investment vehicles and off-balance-sheet companies they casually sponsored in the gold rush. -raghu.
