Allco Max Securities and Mortgage Trust (MAX) expects to reduce the carrying (or book) value of its $10 million exposure in failed Iceland-based Glitnir Bank to nil, following a downgrade by Standard & Poor’s.
S&P downgraded the rating on Glitnir Bank from CCC (credit watch negative) to D on October 9 after the bank was placed into receivership by the country’s banking supervisor.
A D rating by S&P indicates a belief that there will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they become due.
The bank’s ratings downgrade places “further pressure on portfolio tests in Max’s debt program and increases the likelihood Max will be in breach of its portfolio tests”, according to Allco company secretary Tom Lennox.
“Remedying these breaches would have the effect of requiring further asset sales and further significant realised losses,” he said.
