Moody's Investors Service yesterday warned potential buyers of Scottish Re that the company risks running out of liquidity before a sale occurs as the rating agency issued more downgrades to the reinsurer on concerns about collateral and liquidity.

Moody's said Scottish Re will be likely be sold and is an attractive acquisition target for a variety of buyers but the agency said the timing of a sale is uncertain.

Industry analysts believe Munich Re, Hannover Re and Swiss Re will be interested in buying the Bermuda based life reinsurer.

Scottish Re said it is looking at the possibility of either selling itself or finding another investor to inject cash after it hit a liquidity crunch following a big second quarter loss.

The agency said Scottish Re's collateral and liquidity needs are more than had been anticipated at the time of Moody's last rating action on July 31 when it downgraded the company's ratings after a profit warning.

Moody's yesterday downgraded the company's unsecured debt rating to "Ba3" from "Ba2," both below investment grade, speculative ratings.

Moody's also downgraded the company's insurance financial strength ratings of its core subsidiaries to "Baa3" from "Baa2," both medium, investment grade ratings. Also the ratings have been placed on review for a further possible downgrade.

Scottish Re's shares fell 27 cents, or 3.6 percent, to $7.23 during morning trading on the New York Stock Exchange yesterday.

On July 31, the stock plunged 75 percent to a 52 week low of $2.95, after the company announced its president and chief executive Scott Willkomm resigned and forecast a second-quarter loss.

At the time, Scottish Re also said it suspended its dividend and hired investment bankers to help explore its strategic alternatives.

Scottish Re's shares which closed at $23.40 on August 19, 2005 -- are off 69 percent since the start of the year.