A headline in yesterday's Business section incorrectly characterized the move by Standard & Poor's Corp. on the debt rating of Crestar Financial Corp. S&P said Tuesday that it lowered only the outlook for the long-term debt of the Richmond-based banking company, not the debt itself.
Pointing to continued problems in the flagging real estate market, Standard & Poor's Corp. lowered its rating of Signet Banking Corp.'s debt and dropped the outlook for the long-term debt ratings of Crestar Financial Corp.
The credit-rating agency said it downgraded the senior debt of Richmond, Va.-based Signet to a speculative-grade rating of BB-plus from BBB-plus and downgraded its subordinated debt to BB-minus from BBB.
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Signet's commercial paper and the ratings of certificates of deposit from its two banking units, including Signet Bank/Maryland, also were downgraded.
In all, about $265 million of long-term debt was affected.
S&P said it was primarily concerned about Signet's large volume of high-risk loans to the real estate industry. S&P noted that nearly 19 percent of Signet's loans were in real estate construction and that 28 percent were in general commercial real estate loans.
"This concentration in commercial real estate lending leaves Signet vulnerable to declining regional real estate markets," S&P said. "Asset quality has already suffered due to increasing real estate-related nonperforming assets, and will likely deteriorate further as markets remain weak."
S&P also said yesterday that it had affirmed its current ratings for Richmond, Va.-based Crestar but that it was lowering the company's long-term outlook and that further problems could lead to a downgrading of the ratings.
"This firm is experiencing some pressure on asset quality, mainly due to non-performing real estate-related credits," S&P said. "S&P expects non-performing assets to increase further as the real estate markets stay soft."
S&P said it affirmed its ratings of Crestar's senior debt at VTC BBB-plus, its subordinated debt at BBB and its preferred stock at BBB.
The ratings of Crestar Bank's certificates of deposit remained unchanged.