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Fitch Downgrades Popular, Inc. & Subsidiaries; Remain on Watch Negative.

NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 -- Fitch Ratings Fitch Ratings

An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris.
 has downgraded the Long-term Issuer Default Rating (IDR IDR

In currencies, this is the abbreviation for the Indonesian Rupiah.

Notes:
The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion.
) of Popular, Inc. (Popular) to 'B' from 'BBB' and downgraded the Long-term IDRs of units Banco Popular de Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla.  and Banco Popular North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere.  to 'BB-' from 'BBB'. All ratings remain on Rating Watch Negative, where they were first placed on May 15, 2009. A complete listing of ratings follows this release.

Today's action follows Popular's announcement that it is offering an exchange of its preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders.

Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate.
 instruments into common stock to boost its existing weak level of tangible common equity, which stood at just 2.7% of tangible assets Tangible Asset

An asset that has a physical form such as machinery, buildings and land.

Notes:
This is the opposite of an intangible asset such as a patent or trademark. Whether an asset is tangible or intangible isn't inherently good or bad.
 on March 31, 2009. The magnitude of this plan underscores the asset quality challenges currently being faced by Popular. The level of non-performing loans A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms.  remains well above average among major and regional U.S. banks with the prospect of further deterioration.

Popular's ratings remain on Watch Negative given the execution risk associated with the new exchange plan and the prospect of escalating asset quality issues. The removal from Watch Negative hinges Hinges may refer to:
  • Plural form of hinge, a mechanical device that connects two solid objects, allowing a rotation between them.
  • Hinges, a commune of the Pas-de-Calais d├ępartement, in northern France
 on the success of this plan as well as a stabilization of problem loans.

Particularly in a stress scenario, there is the risk that considerable funds from the holding company could be downstreamed to boost bank level capital ratios. This potential outcome could hamper the ability of the holding company (Popular) and sub-holding company (Popular North America, Inc.) to service a considerable level of holding company debt. Consequently, Fitch has widened the notching between holding company and bank level IDRs. The holding company senior debt rating has been assigned a recovery rating of 'RR4'.

Investors in preferred stock are being encouraged to participate through the suspension of preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) . Given this suspension, the preferred stock rating of Popular was downgraded to 'C/RR6' from 'BB+'. (Please see commentary 'Fitch Sees Elevated Risk of Bank Hybrid Capital Coupon Deferral deferral - Waiting for quiet on the Ethernet.  in 2009' dated Feb. 4, 2009 available on Fitch's web site at www.fitchratings.com). While the current plan suggests trust preferred holders will not face an immediate suspension of payments, Fitch believes the potential for future deferral is increasing. Consequently, the trust preferred rating has been downgraded to 'CCC/RR6' from 'BB+'.

Fitch has downgraded the following ratings, which remain on Watch Negative:

Popular, Inc. (Popular)

--Long-term IDR to 'B' from 'BBB';

--Short-term IDR to 'B' from 'F2';

--Senior unsecured to 'B/RR4' from 'BBB';

--Short-term Debt to 'B' from 'F2';

--Individual to 'D/E' from 'C'.

Popular North America, Inc.

--Long-term IDR to 'B' from 'BBB';

--Senior unsecured to 'B/RR4' from 'BBB';

--Short-term IDR to 'B' from 'F2';

--Short-term Debt to 'B' from 'F2';

--Individual rating to 'D/E' from 'C'.

Banco Popular North America

--Long-term IDR to 'BB-' from 'BBB';

--Long-term deposits to 'BB' from 'BBB+';

--Short-term IDR to 'B' from 'F2';

--Short-term deposits to 'B' from 'F2';

--Individual rating to 'D' from 'C'.

Banco Popular de Puerto Rico

--Long-term IDR to 'BB-' from 'BBB';

--Long-term deposits to 'BB' from 'BBB+';

--Short-term IDR to 'B' from 'F2';

--Short-term deposits to 'B' from 'F2';

--Individual rating to 'D' from 'C'.

BanPonce Trust I

--Trust preferred to 'CCC/RR6' from 'BB+'.

Popular Capital Trust I

--Trust preferred to 'CCC/RR6' from 'BB+'.

Popular Capital Trust II

--Trust preferred to 'CCC/RR6' from 'BB+'.

Popular North America Capital Trust I

--Trust preferred to 'CCC/RR6' from 'BB+'.

Fitch has downgraded the following ratings and removed them from Watch Negative:

Popular

--Preferred stock to 'C' from 'BB+'.

Fitch has affirmed the following ratings:

Popular

--Support at '5';

--Support floor at 'NF'.

Popular North America, Inc.

--Support at '5';

--Support floor at 'NF'.

Banco Popular North America

--Support at '5';

--Support floor at 'NF'.

Banco Popular de Puerto Rico

--Support at '4';

--Support Floor at 'B'.

Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used.

In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide.
 of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental  are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Jun 8, 2009
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