Moody's Downgrades More Mortgage Securities

Moody's Investors Service downgraded another $15.93 billion of commercial mortgage-backed securities Thursday amid concerns losses would rise from increased leverage and reduced reserves to pay debt and loan losses. The move follows the ratings firm's announcement last week that it would review the ratings of some $300 billion of bonds backed by commercial real-estate loans. Including the latest round of downgrades, $181.48 billion of commercial mortgage-backed securities has been downgraded by Moody's in the past week. Moody's, which on Thursday downgraded 81 classes of these securities and affirmed 45, expects a significant decline in future property cash flows on higher tenant defaults, bankruptcies and a sharp drop in lease-renewal rates. Those cut include 19 tranches valued at $3 billion at Deutsche Bank AG, 17 classes valued at $4.8 billion from Morgan Stanley and 14 classes valued at $2.2 billion from Citigroup Inc. —John Kell