Major credit rating agencies may cut Lehman ratings

By Dena Aubin

NEW YORK (Reuters) - Major credit rating agencies said on Wednesday they may cut ratings on Lehman Brothers Holdings Inc debt after the bank posted a bigger-than-expected third-quarter loss and announced plans to bolster capital.

Lehman will have to complete a significant transaction such as the sale of a majority stake in the firm, or even the entire company, to avoid a downgrade, Moody's analysts said on a conference call.

Raising capital alone would not preserve Lehman's "A2" rating as it suffers a crisis of confidence.

"Capital is one element but obviously confidence is a key element," said Bob Young, team managing director at Moody's.

Moody's placed Lehman's ratings under review with the direction uncertain, citing the fluidity of the company's situation.

Standard & Poor's said it is mulling a downgrade of Lehman's ratings after the bank reported a $3.9 billion loss for the quarter, hurt by $7.8 billion in writedowns on residential and commercial real estate assets.

Lehman's loss "is significantly larger than we had assumed as of June 2, 2008, when we lowered the long-term counterparty credit rating on the holding company to 'A' from 'A+'," S&P credit analyst Scott Sprinzen said in a statement.

Fitch Ratings also placed Lehman's ratings on negative watch and warned that any downgrade could be by more than one notch and come in the near-term. Fitch announced the move late Tuesday ahead of the earnings announcement.