PLANO, Texas (10/24/08)--Although Fitch Ratings has concerns about specific segments of Southwest Corporate FCU's investments portfolio, the global rating agency says "the vast majority of the company's assets are considered low risk." The corporate "is still considered to be a high credit quality company with strong fundamentals," said Fitch in an Oct. 16 press release. "Besides having an overall low risk profile, Southwest maintains ample asset liquidity, ready access to contingent funding sources, and its current capital base is considered sound and exceeds regulatory requirements," Fitch noted. Fitch downgraded Southwest Corporate's ratings and the short and long ratings remain on negative watch. The ratings are:
* Long-term Issuer Default Rating (IDR) downgraded to A+ from AA-; * Short-term IDR downgraded to F1 from F1+; * Short-term debt to F1 from F1+; * Individual to B from A/B.
According to Southwest Corporate President/CEO John Cassidy, "The primary reason for Fitch's action is to reflect concern about expected losses from Southwest Corporate's $49.5 million holdings of senior unsecured Lehman bonds and potential future losses from Southwest Corporate's mortgage-backed security holdings." "While indicating that Southwest Corporate's loss exposure supports the revised ratings, Fitch also noted that near-term losses will be absorbed by Southwest Corporate's earnings and capital base," said Cassidy in an Oct. 17 statement on the corporate's website. "Even with potential future losses from mortgage-backed securities, Fitch expects Southwest Corporate's capital ratio to exceed regulatory requirements," he added. Cassidy noted the ratings remain at "high investment grade. Fitch also confirmed our message that the unrealized loss of our available-for-sale portfolio overstates the true risk to the company, and that we have the liquidity to hold our securities to recovery which limits the risk of loss from selling securities into distressed market conditions." Cassidy said the corporate's executive team will conduct a webinar Nov. 3 at 3 p.m. CT. Use the webinar link for more information. Cassidy also urged credit unions to read Fitch's statement in full. Use the Fitch Report resource link.