Downgrades Dunk Countrywide

On Thursday, both Fitch Ratings and Moody's Investors Services downgraded Countrywide's and other lenders' debt ratings.

Moody's lowered its ratings on Countrywide's senior debt rating to Baa3 from A3 as well as the deposits from its bank subsidiary to Baa1 from A2. Moody's said that all of Countrywide's credit ratings remain on review for possible downgrade.

"The downgrade of Countrywide's ratings reflects significant diminution in the company's liquidity and debt market access due to the stresses being experienced in a wide array of single-family mortgage markets - stresses that have caused Countrywide to fully draw its committed back-up bank lines," wrote Moody's analyst Philip Kibel, in a note. "In addition, these difficult financial markets create potential challenges to Countrywide's franchise and leadership in the mortgage banking business, and further dislocations in the U.S. single-family mortgage markets."

Fitch lowered Countrywide's long-term issuer default rating to BBB+ from A.

Moody's also lowered ResCap senior debt ratings to Ba1 from Baa3.

Fitch said that the downgrades reflect "the unprecedented disruption in the capital markets, which has severely reduced liquidity for mortgage-centric entities."

In addition, "Fitch's actions reflect the impact on primary liquidity sources and the degree to which the duration of the current market dislocation affects financial flexibility," it said. "Sources of financing that Fitch believed would be more resilient have proven less accessible in the current stressed environment."

Countrywide, which tumbled 13% to a new low Wednesday on the Merrill Lynch comments, slid $3.25 Thursday to $18.04.

>To order reprints of this article, click here: Reprints