For S&P, Gemstone Still Is A Jewel

Moody's announced today it downgraded four notes by Gemstone CDO, an ABS CDO: notes A-1, A-2, A-3 and B. Shares A-1 were initially rated AAA, and now end up below investment grade. In its press release, Moody's notes that "the ratings of approximately 19% of the underlying assets have been downgraded since Moody's last review of the transaction in March 2009. The trustee reports that the WARF of the portfolio is 1,354 as of September 30, 2009 and also reports defaulted assets in the amount of $48.5 million. Securities rated Caa1 or lower make up approximately 32% of the performing portfolio. The trustee reports that the Class C Overcollateralization Test is currently failing."

Now, if we look at the rating history on this paper, we see S&P hasn't touched the rating since 2004! According to S&P, it is still AAA...