Moody's Investors Service sent warnings Wednesday to Citigroup Inc. in New York and HSBC Holdings in London that it might downgrade their structured investment vehicles as the rating company reviews $33 billion worth of the debt.
SIV "debt ratings continue to be vulnerable to the unprecedented large and sustained declines in portfolio value combined with a prolonged inability to refinance maturing debt," Moody's said.
The company is reviewing three Citigroup and two HSBC structured investment vehicles. Moody's said it also might downgrade ratings on two SIVs held by WestLB, a German state-owned lender, and cut ratings on separate SIVs held by Eiger Capital's Orion Finance Corp. in London and Victoria Finance, managed by Ceres Capital Partners in New York.
Citigroup, the largest U.S. bank by assets, said this week that it provided $7.6 billion of financing to the SIVs it runs after they were unable to repay maturing debt.
Treasury Secretary Henry M. Paulson Jr. is pushing for Wall Street to establish a fund by the end of the year to help SIVs avoid a fire sale of assets because of the contagion from record mortgage foreclosures.
SIVs borrow in the short-term commercial paper markets to invest in longer-dated securities including mortgage bonds and bank debt.