Given that Fitch is implicitly admitting that it is making rating decisions not on merit alone, but on perceived implications of what a rating change might do to the company being rated (see Any Credibility Left At Fitch?) what does Countrywide Financial have to lose by pleading downgrade could weaken business?
Countrywide (CFC), the largest U.S. mortgage lender, said in a U.S. regulatory filing on Friday, that if its credit rating dropped below its current lowest rating, this would "severely," limit its access to the public corporate debt market and that could have repercussions on its business.Here is the implied message: Moody's Fitch, and the S&P please do not downgrade our debt. If you do it will impact our business.
A below investment-grade rating also would mean Countrywide would face more restrictive terms and higher rates when it renegotiated or refinanced its existing borrowings, the company said in a U.S. Securities and Exchange Commission filing.
"While we retain our investment grade ratings, all three rating agencies have placed our ratings on some form of negative outlook," the company said in the filling.
Additionally, a below investment-grade rating also could affect the company's bank subsidiary's ability to capture custodial deposit accounts on deposit.
"As of September 30, 2007, up to $5.5 billion of our custodial deposits may be subject to placement with another bank if our credit ratings were reduced below investment grade," Countrywide said in the filing.
A ratings downgrade also would harm its ability to retain commercial deposits.
Fitch is likely on board already given its statement in regards to Ambac (ABK) and MBIA (NYSE:MBI):
"Fitch recognizes that financial guarantors view maintenance of their 'AAA' ratings as a core part of their business strategies, and management teams will take any reasonable actions to avoid a downgrade".
With that in mind, it seems that Countrywide just has to win over Moody's or the S&P. Of course when things deteriorate badly enough, all three rating agencies will be forced on board the debt downgrade train whether they like it or not.