COLUMBUS, Ohio – Corporate One FCU announced Friday it has ended its relationship with Wall Street rating agencies Standard & Poors and Moody’s, as it moves to terminate its commercial paper program, a one-time source of liquidity.
The move will save the $5 billion corporate more than $260,000 a year, mostly on the costs of having the agencies provide short-term credit ratings. "Credit unions are already being negatively affected by the current economic downturn," said Lee Butke, president of Corporate One. "Given the unreliability to be able to generate liquidity by issuing CP, it makes sense to save our members from paying for our debt ratings."
The move follows a similar action earlier last week by Members United Corporate FCU which said it was suspending its relationship with one of its three rating agencies, S&P, and may consider suspending its relationship with a second agency, too. In a message to members, Todd Adams, chief financial officer for the $9 billion corporate, said the new guarantee of all corporate deposits by NCUA should reduce the need for supplemental funding, like commercial paper.
Several other corporates are also reportedly preparing to terminate their relationships with the ratings agencies.
The difficulties at the corporate credit unions, specifically the surge of unrealized losses on their investments, has been exacerbated by ratings downgrades by the Wall Street agencies, eroding confidence in the corporates further. Last month, S&P downgraded Corporate One to its CreditWatch Negative, where it had downgraded Members United to last September.
