RL IV notes on review

MOODY’S has placed the class B floating rate subordinated notes of Genworth’s River Lake IV (RL IV) triple-X deal under review for a possible downgrade. Moody’s said: “While not strictly a life insurance securitisation, the deal was supposed to provide Genworth [the insurance operation spun off by General Electric in 2004] with a source of funding and reinsurance for their reserves.” Moody’s said it had placed the issue under review “due to the economic and credit conditions which affect the investment portfolio of River Lake IV”. It warned “the elevated level of investment losses could result in a multi-notch downgrade ... especially given its structural subordination and first-loss position relative to RL IV’s senior notes”. The notes were assigned a rating of Baa3 in April 2007. Moody’s said the underlying insurance risk had not changed but the investment risk had. The portfolio has a large concentration in residential and commercial mortgage-backed securities, representing some 20% of the investment portfolio’s book value at the end of last month.