NEW YORK (Bloomberg) - Bear Stearns Cos.' credit rating was cut by Standard & Poor's after the securities firm said it would write down the value of sub-prime assets by $1.2 billion, leading to its first quarterly loss since becoming a public company.

Standard & Poor's lowered Bear Stearns's long-term debt rating to A from A+ and kept the short-term rating at A-1, the rating company said in a statement yesterday. A is the sixth-highest investment grade on a scale of 10, while A-1 is the second-best for short-term debt out of four investment-grade ratings.

Bear Stearns, the second-biggest underwriter of mortgage bonds in the US, rose yesterday in New York trading after the writedown was disclosed because it was smaller than some analysts anticipated. The firm's rivals have posted larger losses on their sub-prime holdings, led by Citigroup Inc. with announced writedowns of more than $9 billion. Citigroup's ratings were lowered earlier this month because of its losses.

"The rating cut is exactly in line with what the agencies have been doing with other brokers," said Corinne Cunningham, a credit analyst at Royal Bank of Scotland Group plc. in London. "Bear's writedowns might be smaller, but the firm is also smaller. It's more exposed to revenue contraction next year than peers because it has greater reliance on mortgage-based revenues."

Moody's Investors Service stopped short of downgrading Bear Stearns yesterday, saying it would review its A1 long-term rating and the company's earnings outlook after the writedowns.

CEO James "Jimmy" Cayne has cut 900 jobs, or about six percent of the workforce. Even as he pursues "significant steps" to contain costs, Cayne's efforts may be hampered by "the company's need to remain competitive in terms of compensation," S&P said.

The writedowns will likely lead to a loss in the fourth quarter, chief financial officer Sam Molinaro said on Wednesday. That would be the first unprofitable quarter since at least 1985, when Bear Stearns went public. The firm has reduced its sub-prime holdings by more than 50 percent in the past two months, Mr. Molinaro said.

Bear Stearns now owns $884 million of collateralised debt obligations and the rest of its sub-prime holdings - whole loans and mortgage-backed bonds - are more than offset by credit default swaps, he said.

The pullback makes Bear Stearns "less exposed to further deterioration in subprime-related asset valuations," according to Dominion Bond Rating Service, a smaller rival of S&P and Moody's that kept its A (high) rating on Bear Stearns debt unchanged late yesterday. That's the equivalent of S&P's A+.

"Many of the company's businesses continue to perform strongly," DBRS said in a statement. "Equities, energy trading and interest rates, foreign exchange and portions of credit products within fixed income are delivering solid results.

"Prime brokerage and asset management are performing well after recent adverse events and international businesses are also becoming an increasingly important growth driver."

S&P kept the outlook on Bear Stearns's credit rating at negative because the fixed-income slowdown may hurt earnings in coming quarters, the rating company said. The outlook would turn to stable if earnings recovered faster than expected, S&P said.

Citigroup's debt rating was cut by Moody's Investors Service on November 5 while S&P said the same day that it was considering a reduction. Both rating companies lowered Merrill Lynch & Co.'s credit assessment on October 24. Merrill, which had about $8 billion of writedowns in the third quarter, is rated one level above Bear Stearns at S&P.

S&P said Bear Stearns's writedowns were "comparatively less" than its competitors. "However, the expected loss brings to light the extent to which the company is concentrated in fixed-income businesses."

Bear Stearns has been among the worst performers on the Amex Securities Broker/Dealer Index this year partly because the firm is more reliant on fixed-income revenue and the US market than its peers. It's down 39 percent this year, worst among the five- largest brokers. Bear Stearns fell $3.33 to $99.94 in New York Stock Exchange composite trading.

A quarter of the firm's revenue came from non-US markets in the first nine months of this year, the lowest ratio among the top five US investment banks. Goldman Sachs Group Inc., the No. 1 securities firm by market value, reaped more than half its revenue outside the US.

About half of Bear Stearns's revenue is derived from fixed income, and a quarter of that comes from mortgage-backed securities, according to analysts at Sanford C. Bernstein & Co.