WALL STREET – Standard & Poors placed the 10 corporates it rates on its CreditWatch Negative yesterday because its believes the growing opposition to NCUA’s corporate bailout from natural person credit unions may jeopardize the plan.
The rating agency placed its counterparty credit ratings on nine of the 10 corporates it rates on CreditWatch with negative implications, and left the ratings on Members United Corporate FCU on CreditWatch Negative, where it has been since Sept. 30.
"This action reflects our concern over some recent public opposition within the industry to measures taken in support of corporate credit unions," said Robert Hoban, S&P’s corporate analyst.
The corporates that were downgraded are: CenCorp CU; Constitution Corporate FCU, Corporate One FCU; Corporate Central CU; EasCorp FCU; Southeast Corporate FCU; Southwest Corporate FCU; U.S. Central FCU and WesCorp FCU.
Wall Street ratings are important to corporates that raise funding from outside the credit union system, such as investors in commercial paper issued by the corporates, and help determine what rate the corporates may borrow at.
Hoban cited the growing resistance to NCUA’s $5 billion corporate bailout, which will be funded by a premium assessed on all federally insured credit unions. "We are concerned that this opposition could complicate the regulator’s and the industry’s efforts to address the deterioration in many of the corporate credit unions’ holdings of mortgage-backed and other structured securities," said Hoban. "In addition, this opposition could undermine the strong member support that we believe is required for corporates to maintain their strong creditworthiness."
The Wall Street analyst said he is concerned the opposition could jeopardize the NCUA plan. "We still believe that this support should provide (U.S. Central FCU) and the corporates with the means to weather their current stress and fulfill their mission to members," said Hoban. "We are nonetheless concerned that, absent the federal government directing additional resources specifically toward aid to the credit union industry, such vocal opposition may influence how decisively and aggressively the NCUA might act."
He stressed that S&P will be watching the corporates closely as the report their year-end financials over the coming weeks and their need for capital or other assistance becomes clearer.
