A firm owned indirectly by credit unions that invests on their behalf lost its AAA rating from Standard & Poor's after reporting a $760-million drop in the value of sub-prime-affected securities in its portfolio.
U.S. Central Federal Credit Union, based in Lenexa, Kan., is owned by 26 regional or "corporate" credit unions, which in turn are owned by 8,400 local credit unions. The credit unions are owned by their customer-members, who number 95 million nationwide.
S&P cut its rating on U.S. Central's debt by one level to AA+ and said it might further lower the rating.
"With the housing market weakening to levels not seen since the early 1990s downcycle, we expect U.S. Central's large portfolio of mortgage-related securities to further decline in value," S&P said.
"I've never seen a market disruption or interruption like this," U.S. Central Executive Vice President Dave Dickens said in an interview before S&P's announcement. "Fixed-income markets are in a state of disarray."