Standard and Poor's lowered its long-term counterparty credit rating on Bank of America Corp. and put the holding company and its bank subsidiaries on watch for a downgrade.

The move comes following Bank of America's agreement to acquire Merrill Lynch in an all-stock takeover valued at about $50 billion.

"The downgrade of BofA and the placement of the ratings on CreditWatch with negative implications reflect the risks of acquiring Merrill Lynch in the present turbulent market environment," analysts from the ratings agency wrote.

The long-term counterparty rating was lowered to 'AA-' from 'AA'. S&P said Bank of America's recent acquisition of Countrywide Financial has depleted its capital and now it is further at risk.



S&P also said if the takeover of Merrill wasn't completed they could lower ratings on Merrill Lynch, reflecting "negative market sentiment with respect to the broker dealers in the wake of the collapse of Lehman Brothers Holdings Inc., Merrill Lynch's residual exposure to problem assets, and uncertainty regarding the long-range profit potential of Merrill's investment banking and trading operations if it remains independent."

By Adam Button and edited by Sarah Sussman
©CEP News Ltd. 2008