Standard & Poor's misled investors by giving its highest credit grade to securities whose value plunged during the global financial crisis, an Australian judge ruled. The ratings company said it will appeal.

S&P was "misleading and deceptive" in its rating of two structured debt issues in 2006, Federal Court Justice Jayne Jagot said in her ruling released today in Sydney. The Australian municipalities that brought the case are entitled to damages from S&P and two other defendants, ABN Amro Bank NV and Local Government Financial Services Pty., she ruled.

Twelve Australian councils claimed they lost more than 90 percent of the A$16 million ($16.6 million) they invested in so-called Rembrandt notes rated AAA by S&P and linked to credit-default swaps on investment grade companies. The repackaging of debt into securities with top rankings from S&P and other rating companies contributed to more than $2 trillion in losses and writedowns as Lehman Brothers Holdings Inc. collapsed in 2008 and the world fell into recession.

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