Morgan Stanley Details Consequences of Possible Downgrade
(REUTERS) -- Morgan Stanley said Monday it will have to post another $6.52 billion in collateral to counterparties and clearinghouses if Moody's follows through on a warning that it might cut the Wall Street bank's long-term debt rating by up to three notches.
A one-notch downgrade by Moody's would require $1.04 billion in additional collateral, and a two-notch downgrade would require $5.17 billion in additional collateral, Morgan Stanley said in its annual filing with the U.S. Securities and Exchange Commission on Monday.
Those figures are higher than the $1.69 billion and $5.15 billion Morgan Stanley said it would have to post in the event of a one-notch or two-notch downgrade in its annual filing a year ago. It did not provide an estimate for a three-notch downgrade at that time.
Morgan Stanley currently has a "split" rating among the primary ratings agencies. Moody's rates its long-term debt at A2, one notch above S&P's A- rating, but at the same level as Fitch's A rating.
Moody's warned February 16 that it might downgrade Morgan Stanley by as much as three notches following a reassessment of large financial institutions.
Morgan Stanley also said it lost money in trading during 49 days last year, up from 38 days in 2010.
Despite more money-losing days, the Wall Street bank's sales and trading revenue rose 25.7 percent last year to $12.9 billion, up from $10.3 billion in 2010. Morgan Stanley brought in more than $100 million in trading revenue in 26 days last year, up slightly from 25 days in 2010.
(Reporting By Lauren Tara LaCapra; Editing by Tim Dobbyn and Bob Burgdorfer)
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