The unit of
The New York Attorney General’s office is at least the third government agency investigating S&P’s business of grading commercial mortgage-backed securities, in which banks pool loans on properties such as shopping malls, hotels and skyscrapers to create securities that are sold to investors.
S&P said in July it received a notice from the U.S. Securities and Exchange Commission that the regulator may seek an enforcement action related to the firm’s CMBS ratings in 2011. Massachusetts Attorney General
The ratings firm is separately facing a $5 billion lawsuit filed by the U.S.
After the Justice Department filed the lawsuit, S&P said it would defend itself “vigorously” against the “meritless” claims.
The SEC alleged violations related to the CMBS rankings and “public disclosure made by S&P regarding those ratings thereafter,” according to a July 23 regulatory filing. The SEC may pursue actions including a cease-and-desist order, civil money penalties or a suspension or revocation of the firm’s ratings accreditation.
In a report published late Friday, analysts at J.P. Morgan identified six private label deals they believe could be affected, four of which were sponsred by the bank itself; JPMCC 2011-C3, JPMCC 2011-C4, MSC 2011-C1, JPMCC 2011-FL1, JPMCC 2011-CCHP and WFDB 2011-BXR.
The report notes that all six transactions have at least one other of the “Big Three” rating agencies (Moody’s/S&P/Fitch), with the exception of the subordinate tranches in JPMCC 2011-C4. "One concern among investors is withdrawn ratings or downgrades, but it is too soon to see that happening," the report states. "In addition, the presence of another major rating agency is important for those investors that require ratings or require a 'Big Three' agency."
Three years ago, S&P pulled the ratings that it had assigned to an offering from
The credit grader halted rating any new commercial-mortgage bonds, saying it had to review a potential discrepancy in its model. That August, the company said the conflict wasn’t significant and it would resume grading deals. S&P revised its criteria in 2012 and reentered the market after being frozen out for more than a year.