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Fitch adjusts U.S. Centrals ratings again
CHICAGO (2/3/09)--Fitch Ratings has adjusted the ratings of U.S. Central FCU down a notch, reflecting last week's news that the National Credit Union Administration (NCUA) was implementing a corporate stabilization plan and injecting $1 billion into U.S. Central, Fitch said Monday. U.S. Central's Individual Rating is now "F" and it has been removed from Rating Watch Negative. All other ratings, including the long- and short-term Issuer Default Ratings (IDR) of "AA" and "F1+," respectively, are now on Rating Watch Negative as Fitch waits to see how NCUA's stabilization plan and possible restructuring of the corporate credit union system play out. “We have strived throughout our history to be good stewards of credit union funds, investing them in highly rated securities,” said Francis Lee, president/CEO of U.S. Central. “We regret that the historical downturn in the housing market and the related increase of loan defaults and delinquencies have adversely impacted the ratings of a portion of our securities--and, in turn, our own credit ratings, along with those of almost all rated financial institutions,” Lee said. Fitch said the new rating reflects the loss realized by U.S. Central and the impairment to its capital base "that necessitated support from the National Credit Union Share Insurance Fund. The net loss of approximately $1.1 billion for 2008 exceeds USC's retained earnings, the recently issued $450 million of Paid-In-Capital (PIC) II and a portion of the original PIC issuance." Fitch noted the prospect of future losses remains, limiting the company's future capital generation capability. The latest rating reflects Fitch's opinion that "USC would have ultimately defaulted had it not received significant external support." The "F" rating will be in place for short time only, Fitch said. "Once clarity is achieved on how the support measures, as well as the proposed restructuring of the corporate credit union system impacts USC's financial profile and business model, Fitch will reassess the Individual rating." NCUA's support for U.S. Central through the $1 billion capital note injection, its guarantee for all uninsured member depository shares, and other recent initiatives to inject liquidity into the corporate credit union system, "substantiate the high probability of external support that Fitch factored into USC's current long- and short-term ratings," Fitch said. However, the announcement that NCUA is soliciting input for reforms to the corporate credit union system "signals probable future changes to the system that could impact Fitch's view of future support." Use the link to access Fitch Ratings' press release.
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