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With the addition of Bear Stearns Cos. to J.P. Morgan & Chase Co., one has to wonder: how would that union affect the creditworthiness of the acquirer? Apparently, credit rating agencies S&P and Fitch Ratings would leave their credit rating on J.P. Morgan unchanged for now. So, in the parlance of credit speak, J.P. Morgan's credit is still investment grade.
"The ratings on JPMC reflect our expectation that the bank's post-acquisition capital and leverage metrics will remain satisfactory. JPMC is acquiring some valuable businesses, such as Bear's prime brokerage and clearing operations, which we do not expect will add much risk to its balance sheet," said Standard & Poor's credit analyst Tanya Azarchs. "In the longer term, we expect that JPMC will benefit from the incremental income that the acquisition of Bear's activities will provide." The question, however, remains: does JP Morgan really have enough to cover Bear's obligations even with financing from the Federal Reserve of up to $30 billion to support Bear's less liquid assets? JP Morgan CEO Jamie Dimon seems to think so. But you have to wonder what will happen if JP Morgan still doesn't have enough to cover Bear's obligations. The answer to that question, well--the markets don't want to know. And investors can't exactly rely on credit rating agencies for guidance, as we've seen time and time again, they don't exactly have a good track record on warning the markets of worst-case scenarios. -- Gerald Magpily
Bear Stearns Bump: How markets are treating other institutions Bear Stearn's Cayne abridged weekend J.P. Morgan-Bear Stearns advisers Bear, Lehman shares pounded early Bear Stearns deal heightens Lehman jitters Market reactions to Bear Stearns, J.P. Morgan deal J.P. Morgan, Bear Stearns conference call recap Bear investors left holding pennies Hopefully Cayne paid cash for his apartment
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