Ratings agency Moody's said it may downgrade debt issued by IFSC-based financial vehicle Starts (Ireland) as a result of its deteriorating credit quality.
In a statement issued yesterday, Moody's said it had placed $30 million (€22 million) worth of Tigers principal-rated index-linked CDO notes issued by HSBC-backed Starts (Ireland) on credit watch with a view to a possible downgrade.
According to Moody's, notes issued by Starts are underwritten by banking giant HSBC, although the most recent accounts for the Irish unit state the notes are not consolidated into HSBC's accounts. HSBC did not return calls last night.
The Tigers notes, which are currently rated Aa3 by Moody's and due to expire in March 2013, were originally assigned an Aa2 rating in December 2005.
They were downgraded in July 2006 to Aa3 by Moody's, which cited a deterioration in the portfolio's credit quality.
In the original 2005 statement, Moody's said the collateral for the transaction consists of $30 million Aaa-rated Bear Stearns asset-backed securities I trust 2005-TC2 notes.
Bear Stearns was one of the first big casualties of the recent problems in the global markets after the collapse of two of its managed mortgage funds led to the resignation of its president and co-chief operating officer.
According to accounts filed with the Companies Office for Starts (Ireland), the company's net indebtedness at the end of December 2005, the latest period for which figures are available, was €1.2 billion.
Its principal shareholder, with 39,984 shares, is AIB Worthytrust Limited. In addition, four different sets of AIBWT nominees and JF Worthy Trust hold one share each.
The accounts state the company has entered into a number of different series (debt issues) and that each one is governed by a separate memorandum. It also says each series, with the exception of 2004-12, is linked to a portfolio of reference obligation by way of swap agreements with HSBC bank.
AIB International Financial Services is the company's administrator and secretary. A spokesman for AIB declined to comment on the company last night.
Last month, troubles at another Dublin fund, Ormond Quay, were behind the near-collapse of German state bank Sachsen LB. As a result, its ultimate owner, the German state of Saxony, was forced to agree an emergency sale to rival Landesbank LBBW.
Fellow German bank IKB, the first European victim of the credit market turmoil, has meanwhile said it will lose nearly $1 billion this year after its US subprime investments turned sour.
