Great Western Ratings Cut; Real Estate Loans Are Cited


Moody’s Investors Service, adding controversy to the debate over the health of California real estate loans, said Thursday that it lowered the ratings for $6.4 billion in debt for Great Western Financial and its Great Western Bank subsidiary.

For example, Great Western Financial’s senior debt was lowered to BAA2 from BAA1. Great Western Bank’s was lowered to Single-A3 from Single-A2.

The New York-based bond rating service said the move reflects concerns over whether the Beverly Hills-based thrift has set aside enough money to cover potential losses on commercial real estate loans “in view of the uncertain outlook for the California real estate market.”

The move by Moody’s is significant because Great Western is considered one of the state’s strongest thrifts. A lower rating will make it more expensive for Great Western to raise money through bonds.


Moody’s move also raises more controversy about California real estate loans, especially commercial ones made to finance offices, shopping centers, hotels and housing tracts. Last month, the Federal Deposit Insurance Corp. released a study listing six California areas as spots where problems with real estate problems could be brewing. On Thursday, state banking regulators countered with their own study challenging some of the FDIC conclusions, saying the market remains relatively healthy compared to problem areas such as New England and Arizona.

Great Western’s bond ratings from Moody’s are one of the highest in the industry and are now equal to the ratings for H. F. Ahmanson, parent of Home Savings of America and also one of the nation’s strongest thrifts.

In a statement, Great Western called Moody’s actions “particularly inappropriate” in the wake of its strong earnings, healthy levels of capital that serve as a financial cushion and the overall strength of the California marketplace. Great Western recognized some real estate problems last year, but they mostly were outside California, in Texas, Arizona and Florida.