Sub-prime writedowns could reach $285 billion -S&P

LONDON, March 13 (Reuters) - Global writedowns linked to the U.S. sub-prime crisis could reach $285 billion, $20 billion more than expected earlier this year, credit ratings agency Standard & Poor's said in a report published on Thursday.

The increase comes after S&P raised the writedowns forecast among Collateralised Debt Obligations (CDOs) of sub-prime asset-backed securities (ABS) -- portfolios of mortgages broken down in peaces and traded amongst banks.

"At the heart of the decreasing value of CDOs of ABS (...) is the poor underwriting of sub-prime loans in the U.S. from 2005 to 2007," the report said.

Fuelled by low interest rates and rising housing prices, banks and other financial institutions granted about $1.2 trillion of sub-prime, or risky, loans in the United States between 2005 and 2007.

"The delinquency and default rates of the pools of sub-prime loans from those years have deteriorated continually," the report said. "The slowing U.S. economy and continuing fall in U.S. house prices have further weakened borrowers' repayment capacity and reduced recoveries on sales of foreclosed properties."

Exposure to the market led banks such as UBS AG (UBSN.VX: Quote, Profile, Research) to post billion-dollar losses. Carlyle Capital Corp (CARC.AS: Quote, Profile, Research), a fund listed in Amsterdam, has recently defaulted on $16.6 billion of debt after failing to meet margin calls.

"Market forces are placing further downward pressure on valuations, and we expect to see more writedowns related to these pressures in coming weeks and months," said Standard & Poor's credit analyst Scott Bugie in the report.

However, the amount of writedowns could cease soon for large financial institutions, which have already announced losses or have already reduced their exposure, the report said.

"The positive news is that, in our opinion, the global financial sector appears to have already disclosed the majority of valuation write-downs of sub-prime ABS," the report said. (Reporting by Elena Moya; Editing by Mike Elliott)

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