Moody's prunes HSBC USA

Moody's Investors Service said it downgraded by one notch the long-term ratings of HSBC USA Inc. These ratings include the senior unsecured debt rating to A2 from A1, the backed rating for the subordinated debt issued by Republic New York Corp. and previously assumed by HSBC USA to A3 from A2, and the provisional ratings for subordinate shelf to (P)A3 from (P)A2, preferred shelf to (P)Baa1 from (P)A3, and preferred shelf non-cumulative to (P)Baa2 from (P)Baa1.

The agency also lowered HSBC USA's senior unsecured shelf and senior unsecured medium-term note program to (P)A2 from (P)A1.

The rating action ends the review for downgrade which began on July 17, Moody’s said. The outlook is stable.

“The ratings were downgraded because there is a reduced volume of internal loss-absorbing capacity (ILAC) outstanding at HSBC North America Holdings Inc. (HNAH), the parent of HSBC USA Inc. and the U.S. intermediate holding company (IHC) for HSBC Holdings plc (HSBC Holdings, A3 stable). In the application of Moody's advanced loss given failure (LGF) analysis, the resulting smaller amount of loss absorption provided by creditors at the IHC level means the likely severity of loss in the event of a failure has increased for creditors of HSBC USA Inc.,” Moody’s said in a press release.

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