Feb. 23 (Bloomberg) -- Standard & Poor’s lowered ratings on securities issued by a $400 million Goldman Sachs Asset Management loan fund, reflecting “deterioration in the credit quality” of the underlying collateral.

S&P cut the class D notes of Goldman Sachs Asset Management CLO Plc one level to BBB-, the lowest grade of investment quality, from BBB, according to a report today. The class E notes were lowered two grades to B+, the fourth-highest junk rating, from BB, the report said. S&P rated $18 million of the D notes and $16 million of the E notes when the securities were sold in 2007, according to data compiled by Bloomberg.

Ratings companies are downgrading collateralized loan obligations, which parcel high-yield, high-risk company loans into securities of varying risk and returns, as more company rankings are cut. The default rate for high-yield companies may almost triple to 13.6 percent this year, the highest on record, according to calculations from New York University Professor Edward Altman.

The asset management arm of Goldman Sachs raised the CLO in 2007, Bloomberg data show. The amount of corporate debt in the CLO with ratings of CCC+ or lower rose to $62.09 million as of Jan. 23, from $9.87 million when the transaction closed in November 2007, S&P wrote in the report.

S&P affirmed the grades on the securities rated AAA, AA and A, according to the report. High-yield debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- by S&P.

To contact the reporter on this story: Pierre Paulden in New York at ppaulden@bloomberg.net

Last Updated: February 23, 2009 18:53 EST