Moody's Investors Service is reviewing the Business Loan Express SBA Loan Trust 2001-1 transaction, and might downgrade the deal's affected securities.

Classes A and M notes, rated Aaa' and A1' respectively, were targeted for the review, because underlying loans that were more than 90 days delinquent amounted to 20.49% of the outstanding pool balance, the rating agency said.

The rating agency's closer scrutiny marks the latest round of trouble for the small business loan ABS issuer, stemming from fraud allegations at the company that sells the loans to the trust. Last December, former Business Loan Express executive, Patrick Harrington, was indicted on charges of fraudulently qualifying about 76 loans guaranteed by the Small Business Administration, amounting to about $76.8 million, according to published accounts. The charges also intensified longstanding animosity between Allied Capital Corp., Business Loan Express' parent company, and Greenlight Capital, which is believed to hold a stake in the company.

Earlier this year, Fitch Ratings and Standard & Poor's both began taking closer looks at loans securing BLX bonds that they rated. In January, Fitch identified two loans totaling about $503,000 that secured bonds issued in BLX's 2001-1 and 2002-1 transactions. The rating agency said that a majority of the loans currently under investigation by the Department of Justice were originated by BLX's Detroit office. S&P identified about nine BLX deals that it rated. Similar to Fitch, the company said it would continue to monitor the situation before taking any action.

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