SEC Grants Six-Month Delay on Ratings for Asset-Backed Debt in Statements

The Securities and ExchangeCommission will allow asset-backed bond issuers to omit creditratings from filings for six months to help them comply with newrules that are part of the most sweeping financial overhaulsince the 1930s.

Borrowers aren’t able to obtain permission from ratingsfirms to include their rankings in their registrationstatements, Meredith Cross, the director of the SEC’s divisionof corporate finance, said today in an e-mailed statement.

“This action will provide issuers, rating agencies andother market participants with a transition period in order toimplement changes to comply” with regulations that were signedinto law this week by President Barack Obama, Cross said.

The financial legislation makes credit-rating companiesvulnerable to lawsuits when underwriters include theirassessments in documents used to sell debt. The law subjectsratings firms, such as Moody’s Investors Service, Standard &Poor’s and Fitch Ratings, to so-called expert liability, meaningthey would face the same legal risks as accountants and otherparties that participate in bond sales.

Sales were held up as the ratings firms balked at allowingissuers to include their rankings in public documents, saidMalcolm Dorris, a senior partner in the securitization group atlaw firm Dechert LLP. Companies were considering alternatives tothe public markets, such as selling in the 144a market, wheresales aren’t registered with the SEC, Dorris said.

Ford Motor Co.’s finance arm canceled a planned sale ofasset-backed debt, the Wall Street Journal reported yesterday onits website, citing market participants it didn’t name.

Brenda Hines, a spokeswoman for Ford Motor Credit, declinedto comment.