Moody's Investors Service on Friday said it has downgraded $180 billion of U.S. collateralized loan obligations, or about 65 percent of deals it reviewed, as part of a broad appraisal of CLO ratings.
The CLOs, bundles of loans split into different classes by risk, were downgraded by an average of about three notches each, Moody's said in a statement.
CLOs and collateralized debt obligations, similar products made up of loans and bonds, were a chief cause of bank writedowns during the global credit crisis as their values plunged.
The downgrades reflect unprecedented credit stress that the corporate sector has been experiencing, Moody's said.
The agency said it has updated its modeling assumptions and now expects CLO ratings to be stable over the medium term.
Moody's said it has reviewed almost the entire universe of Aaa-rated CLO tranches in the United States, with just 35 percent retaining their top ratings.
A review of CLOs in Europe, the Middle East and Africa is expected to be finished by the end of the year, Moody's said. The agency said it has downgraded about $35 billion in CLOs outside the United States so far.