S&P’s AAA Ratings for CDOs Sold to Australian Towns Will Be Issue of Trial

[dkf]

Standard & Poor’s, the rating company being investigated by U.S. regulators over the nation’s credit downgrade, will face trial in an Australian court to defend allegations it misled investors with ratings of collateralized debt obligations, in the first case of its kind.

Two Australian towns and an insurer sued the U.K. arm of S&P’s owner McGraw-Hill Cos., along with financial services firms including the Royal Bank of Scotland Group Plc (RBS), who were involved in the sale of AAA-rated securities that plummeted in value during the global economic crisis in 2008.

“It is my understanding that this is the first trial globally, focusing on a rating agency’s involvement in the CDO debacle that materially contributed” to the global downturn, John Walker, executive director of litigation funder IMF (Australia) Ltd., which is paying for the lawsuit, said in an e- mail. Walker declined to comment further until the start of the trial tomorrow.

Statecover Mutual Ltd., a workers’ compensation insurer of local governments in New South Wales, Bathurst regional council and Corowa Shire Council seek to recoup the losses they incurred from the purchase of securities in 2006.

http://www.bloomberg.com/news/2011-10-02/s-p-faces-australia-trial-over-ratings-of-cdos-sold-to-towns.html

[mmonk]

1. Thank you.