Critical Week For Credit Securities

JP Morgan’s recent filing of detailed information on the valuations of specific structured credit securities held by itself and other banks with a court in Canada caught many off guard. Perhaps the biggest surprise to come out of the filings was that some subprime mortgage-linked securities issued by groups like UBS have lost almost 95 percent of their value.

The financial community has typically kept this kind of information under wraps. It became public only now because JP Morgan is spearheading an effort to restructure a group of 20 Canadian structured investment vehicles that issued $32 billion of asset-backed commercial paper.Â

The filings revealed bad news for other securities, as well, showing that some lost almost a third of their value, despite the fact that many were considered low risk and carried top ratings from the credit ratings agencies.

According to a March 23 article in Financial Times, the price estimates will no doubt garner the attention of auditors and regulators alike, particularly since they come at a time when the issue of security pricing is under fire. Banks are feeling the heat from regulators to book the losses they’ve incurred on the instruments. But because trading has dried up in many corners of the credit markets, it’s difficult, if not impossible, to compare prices for these instruments between banks.

For their part, regulators and investors are afraid that the banks are still varying in the degree to which they have recorded losses on their credit instruments in recent months, not to mention how hard it is for auditors to compare internal estimates with external benchmarks, according to the Financial Times story.

The worst of this storm is far from over. And, the ultimate implications for the broader economy continue to change by the day.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage related investment losses.

This entry was posted on Wednesday, March 26th, 2008 at 3:22 pmand is filed under General Investor Information, Structured Investment Vehicles (SIV's), UBS. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.