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Rating Action:

Moody's confirms Popular's ratings, outlook remains negative.

24 Sep 2009

New York, September 24, 2009 -- Moody's Investors Service confirmed the ratings of Popular, Inc. and its subsidiaries, including those of its lead bank subsidiary, Banco Popular de Puerto Rico (BPPR). BPPR's bank financial strength rating was confirmed at D+, its long-term deposits at Baa2 and its short-term ratings at Prime-2. Popular, Inc.'s senior debt rating was confirmed at Ba1 and its senior subordinated debt rating at Ba2. In addition, Popular, Inc's junior subordinated debt rating was confirmed at (P)B1 and its preferred stock rating affirmed at Ca. With the exception of a stable outlook on the Ca preferred rating, the outlook on the company is negative. This concludes Moody's review of the ratings of Popular, Inc and its rated subsidiaries that was initiated on June 9, 2009. Popular, Inc. and its subsidiaries are referred to collectively hereafter as 'Popular'.

Moody's said that the confirmation of Popular's ratings and negative outlook reflects the successful outcome of the company's exchange offer that has significantly boosted its Tier 1 common equity ratio and ratio of tangible common equity to risk-weighted assets on the one hand, and Moody's expectation of continuing elevated credit losses in 2009 and into 2010 on the other.

Moody's noted that Popular had exchanged $934 million worth of trust preferred securities and preferred stock into common stock which resulted in a boost to the company's common equity of approximately $918 million. The company also converted $935 million of TARP preferred stock issued to the U.S. Treasury in December 2008 into trust preferred securities. This conversion caused Popular to recognize an accounting gain of $485 million arising from the difference between the fair value of the trust preferred securities and carrying value of the TARP preferred stock. Although this accounting gain is factored into the computation of Popular's Tier 1 common equity ratio, Moody's does not consider it to be the equivalent of issuing common stock, and therefore excludes it from its computation of Popular's ratio of tangible common equity to risk-weighted assets.

While Popular's capital position has been strengthened, Moody's expects Popular to continue to experience elevated credit costs. Popular is facing challenging conditions in its home market of Puerto Rico, which is in its fourth year of economic recession, and in its U.S. mainland operations. These credit losses are expected to continue during the rest of 2009 and into 2010, and will likely result in the company's reporting significant losses, Moody's added.

Moody's reiterated that a one-notch of lift for systemic support has been incorporated in the company's long-term deposit rating in view of the company's leading market presence in Puerto Rico. No such lift is incorporated in senior unsecured and subordinated debt ratings of the holding company, which Moody's views as being structurally subordinated to the bank, and therefore less likely to receive systemic support.

Outlook Actions:

..Issuer: BanPonce Trust I

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Banco Popular de Puerto Rico

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular Capital Trust I

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular Capital Trust II

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular Capital Trust III

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular Capital Trust IV

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular International Bank, Inc.

....Outlook, Changed To Negative(m) From Rating Under Review

..Issuer: Popular North America Capital Trust I

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular North America Capital Trust II

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular North America Capital Trust III

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Popular North America, Inc.

....Outlook, Changed To Negative(m) From Rating Under Review

..Issuer: Popular, Inc.

....Outlook, Changed To Negative(m) From Rating Under Review

Confirmations:

..Issuer: BanPonce Trust I

....Preferred Stock Preferred Stock, Confirmed at B1

..Issuer: Banco Popular de Puerto Rico

....Bank Financial Strength Rating, Confirmed at D+

....Issuer Rating, Confirmed at Baa2

....OSO Rating, Confirmed at P-2

....Deposit Rating, Confirmed at P-2

....OSO Senior Unsecured OSO Rating, Confirmed at Baa2

....Senior Unsecured Deposit Rating, Confirmed at Baa2

..Issuer: Popular Capital Trust I

....Preferred Stock Preferred Stock, Confirmed at B1

....Preferred Stock Shelf, Confirmed at (P)B1

..Issuer: Popular Capital Trust II

....Preferred Stock Preferred Stock, Confirmed at B1

....Preferred Stock Shelf, Confirmed at (P)B1

..Issuer: Popular Capital Trust III

....Preferred Stock Shelf, Confirmed at (P)B1

..Issuer: Popular Capital Trust IV

....Preferred Stock Shelf, Confirmed at (P)B1

..Issuer: Popular International Bank, Inc.

....Multiple Seniority Shelf, Confirmed at (P)Ba2, (P)Ba1

..Issuer: Popular North America Capital Trust I

....Preferred Stock Preferred Stock, Confirmed at B1

..Issuer: Popular North America Capital Trust II

....Preferred Stock Shelf, Confirmed at (P)B1

..Issuer: Popular North America Capital Trust III

....Preferred Stock Shelf, Confirmed at (P)B1

..Issuer: Popular North America, Inc.

....Multiple Seniority Medium-Term Note Program, Confirmed at Ba2, Ba1

....Multiple Seniority Shelf, Confirmed at (P)Ba2, (P)Ba1

....Senior Unsecured Medium-Term Note Program, Confirmed at Ba1

....Senior Unsecured Regular Bond/Debenture, Confirmed at Ba1

..Issuer: Popular, Inc.

....Junior Subordinated Shelf, Confirmed at (P)B1

....Multiple Seniority Medium-Term Note Program, Confirmed at Ba2, Ba1

....Multiple Seniority Shelf, Confirmed at (P)B1, (P)Ba1

....Senior Unsecured Medium-Term Note Program, Confirmed at Ba1

The last rating action on Popular was taken in June 09, 2009, when Moody's downgraded BPPR's bank financial strength rating to D+ from C and long-term deposit rating to Baa2 from A3. Its short-term ratings were affirmed at Prime-2. Popular, Inc.'s senior unsecured debt rating was lowered to Ba1 from Baa1, its senior subordinated debt rating to Ba2 from Baa2, its junior subordinated debt rating to B1 from Baa2 and its preferred stock rating to Ca from Baa3.

The principal methodologies used in rating Popular were Moody's "Bank Financial Strength Ratings: Global Methodology", published in February 2007, and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published in March 2007, and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Popular, Inc. (NASDAQ: BPOP), headquartered in San Juan, Puerto Rico, reported total assets of $36.5 billion as of June 30, 2009.

New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael L. Mascarenhas
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's confirms Popular's ratings, outlook remains negative.
No Related Data.
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