S&P's press release says, "Standard & Poor's Ratings Services' Fund Ratings group said today that securities guaranteed under the Federal Deposit Insurance Corp.'s (FDIC) Temporary Liquidity Guarantee Program (TLGP) are consistent with our principal stability fund ratings criteria for rated money-market funds. Exposure to such instruments will not affect ratings as long as the instruments meet the guidelines outlined below."
The statement continues, "Standard & Poor's has determined that the guarantee of debt issued under the FDIC's TLGP will permit us to assign such debt the same rating as we currently rate the U.S. government ('AAA' for long-term debt or 'A-1+' for short-term debt) as outlined in "U.S. Guarantee Of Bank Debt Conforms With Standard & Poor's Guarantee Criteria," published Nov. 21, 2008, on RatingsDirect. However, although the U.S. government supports the credit quality of these instruments, a fund's investment advisor should prudently manage the instruments' potential market and liquidity risks."
S&P says the following "limitations apply for FDIC TLGP guaranteed securities in highly rated money-market funds (rated 'AAAm', 'AAm', and 'Am')": 1) No more than 5% invested with any one issuer; 2) Legal final maturities of two years or less; and, 3) Securities with legal final maturities of more than 397 days but less than two years count toward the fund's 10% illiquid/limited liquidity basket. They add, "In addition, we will evaluate exposures to FDIC TLGP guaranteed securities on a case-by-case basis in funds with limited assets and funds with a volatile and/or concentrated shareholder base. We consider these limits to be appropriate for highly rated funds given these investments' idiosyncratic risks and the absence of a fluid secondary market due to their relative newness."
Finally, the release states, "Standard & Poor's Fund Ratings Group opinions on FDIC TLGP securities speak to their consistency with our principal stability fund ratings criteria and do not address whether such instruments meet applicable regulatory requirements."
