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Rating Action:

Moody's reviews for downgrade the ratings of three Puerto Rican banks

11 Feb 2014

Actions follow downgrade of Puerto Rico's GO bond rating to Ba2

NOTE: On March 13, 2014, the press release was revised as follows: At the beginning of the press release, the list of ratings placed on review was revised .

In addition, in the list of affected ratings at the end of the press release, under the heading “On Review for Possible Downgrade”, for issuers Banco Santander Puerto Rico, Banco Popular de Puerto Rico and FirstBank Puerto Rico, removed reference to Baseline Credit Assessment and Adjusted Baseline Credit Assessment. Revised release follows:

New York, February 11, 2014 -- Moody's Investors Service placed on review for downgrade certain ratings of three Puerto Rican banks, including Banco Santander Puerto Rico (BSPR), Popular, Inc. and FirstBank Puerto Rico (FirstBank).

The following ratings were placed on review:

- BSPR's standalone bank financial strength rating (BFSR) of D+, mapping to a baseline credit assessment (BCA) of ba1

- - The long-term ratings of Popular, Inc. and its subsidiaries (collectively referred to as 'Popular'), including Banco Popular de Puerto Rico's (the lead bank) standalone BFSR of D, mapping to a BCA of ba2

- The long-term ratings of FirstBank, including its standalone BFSR of E+, mapping to a BCA of b2

Additionally, the following ratings were affirmed:

- BSPR's supported deposit and debt ratings because those ratings benefit from the bank's affiliation with its US affiliate, Santander Bank, N.A. (deposits Baa1 stable, standalone BFSR/BCA C-/baa1 stable). Following the affirmation, the outlook on the supported ratings is stable.

- The ratings of Doral Financial Corporation (senior unsecured debt at Caa3 negative)

- The short-term ratings of Popular and FirstBank

- The ratings of the senior bonds issued by BSPR and Doral Financial Corporation through the Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (AFICA)

Today's actions follow Moody's 7 February 2014 action to downgrade the general obligation (GO) rating of the Commonwealth of Puerto Rico to Ba2 with a negative outlook from Baa3 (see press release "Moody's downgrades Puerto Rico GO and related bonds to Ba2, notched bonds to Ba3 and COFINA bonds to Baa1, Baa2; outlook negative," available on moodys.com).

RATINGS RATIONALE

Moody's said the reviews for downgrade will focus on the potential effect of further deterioration in the Puerto Rican economy and/or the commonwealth's fiscal condition on the credit profiles of BSPR, Popular and FirstBank.

Puerto Rico's economy is in the midst of a protracted recession that began in 2006, and it continues to be challenged by high unemployment, low workforce participation, high poverty levels compared to the US mainland, a declining population, and weakness in its key pharmaceutical sector. This economic weakness, combined with years of deficit financing, pension underfunding and budgetary imbalance, have now put the commonwealth in a position where its debt load and fixed costs are high, its liquidity is narrow, and its market access has become constrained.

During the review, Moody's will re-evaluate the potential credit losses in the banks' loan and securities portfolios, including direct and indirect exposures to the commonwealth, under more adverse scenarios. The rating agency is concerned that the banks' high levels of non-performing assets could lead to significant losses if conditions do not improve. Moody's will also consider the banks' willingness to take on additional exposure to the commonwealth.

Moody's added that it will assess the impact of ongoing market volatility on the banks' funding positions. Although the banks' deposit flows have remained steady during this period of heightened volatility, Moody's will assess each bank's contingency funding plans in light of further prolonged market uncertainties.

On Review for Possible Downgrade:

..Issuer: Banco Santander Puerto Rico

....Bank Financial Strength Rating, Placed on Review for Possible Downgrade, currently D+

..Issuer: Banco Popular de Puerto Rico

....Bank Financial Strength Rating, Placed on Review for Possible Downgrade, currently D

....Senior Unsecured Deposit Rating, Placed on Review for Possible Downgrade, currently Ba2

....Issuer Rating, Placed on Review for Possible Downgrade, currently Ba3

....OSO Rating, Placed on Review for Possible Downgrade, currently Ba3

..Issuer: Popular, Inc.

....Senior Unsecured Medium-Term Note Program, Placed on Review for Possible Downgrade, currently (P)B1

....Multiple Seniority Medium-Term Note Program, Placed on Review for Possible Downgrade, currently (P)B1

....Multiple Seniority Medium-Term Note Program, Placed on Review for Possible Downgrade, currently (P)B2

....Junior Subordinated Shelf, Placed on Review for Possible Downgrade, currently (P)B3

....Non-cumulative Preferred Stock, Placed on Review for Possible Downgrade, currently Caa1 (hyb)

..Issuer: Popular Capital Trust I

....Preferred Stock, Placed on Review for Possible Downgrade, currently B3 (hyb)

....Preferred Stock Shelf, Placed on Review for Possible Downgrade, currently (P)B3

..Issuer: Popular Capital Trust II

....Preferred Stock, Placed on Review for Possible Downgrade, currently B3 (hyb)

....Preferred Stock Shelf, Placed on Review for Possible Downgrade, currently (P)B3

..Issuer: Popular Capital Trust III

....Preferred Stock Shelf, Placed on Review for Possible Downgrade, currently (P)B3

..Issuer: Popular North America Capital Trust I

....Preferred Stock, Placed on Review for Possible Downgrade, currently B3 (hyb)

..Issuer: Popular North America, Inc.

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently B1

....Senior Unsecured Medium-Term Note Program, Placed on Review for Possible Downgrade, currently (P)B1

....Multiple Seniority Medium-Term Note Program, Placed on Review for Possible Downgrade, currently (P)B1

....Multiple Seniority Medium-Term Note Program, Placed on Review for Possible Downgrade, currently (P)B2

..Issuer: BanPonce Trust I

....Preferred Stock, Placed on Review for Possible Downgrade, currently B3 (hyb)

..Issuer: FirstBank Puerto Rico

....Bank Financial Strength Rating, Placed on Review for Possible Downgrade, currently E+

....Senior Unsecured Deposit Rating, Placed on Review for Possible Downgrade, currently B2

....Issuer Rating, Placed on Review for Possible Downgrade, currently B3

....OSO Rating, Placed on Review for Possible Downgrade, currently B3

Outlook Actions:

..Issuer: Banco Santander Puerto Rico

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

..Issuer: Banco Popular de Puerto Rico

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

..Issuer: Popular, Inc.

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

..Issuer: Popular Capital Trust I

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

..Issuer: Popular Capital Trust II

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

..Issuer: Popular Capital Trust III

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

..Issuer: Popular North America Capital Trust I

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

..Issuer: Popular North America, Inc.

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

..Issuer: BanPonce Trust I

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

..Issuer: FirstBank Puerto Rico

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

..Issuer: Doral Financial Corporation

....Outlook, Remains Negative

Affirmations:

..Issuer: Banco Santander Puerto Rico

....Adjusted Baseline Credit Assessment, Affirmed baa1

....Senior Unsecured Deposit Rating, Affirmed Baa1

....Short-term Deposit Rating, Affirmed P-2

....Issuer Rating, Affirmed Baa1

....OSO Rating, Affirmed Baa1

....Short-term OSO Rating, Affirmed P-2

....Senior Unsecured Bank Note Program, Affirmed (P)Baa1

....Senior Unsecured Bank Note Program, Affirmed (P)P-2

....Senior Unsecured Commercial Paper, Affirmed P-2

..Issuer: Banco Popular de Puerto Rico

....Short-term Deposit Rating, Affirmed NP

....Short-term OSO Rating, Affirmed NP

..Issuer: FirstBank Puerto Rico

....Short-term Deposit Rating, Affirmed NP

....Short-term OSO Rating, Affirmed NP

..Issuer: Doral Financial Corporation

....Senior Unsecured Regular Bond/Debenture, Affirmed Caa3

..Issuer: P.R. Ind Tour Ed Med & Env Ctl Facs Fin Auth (AFICA)

....Senior Unsecured Revenue Bonds Jun 1, 2018, Affirmed Baa1

....Senior Unsecured Revenue Bonds Dec 1, 2019, Affirmed Baa1

....Senior Unsecured Revenue Bonds Dec 1, 2021, Affirmed Baa1

....Senior Secured Revenue Bonds Dec 1, 2014, Affirmed Caa3

....Senior Secured Revenue Bonds Jun 1, 2026, Affirmed Caa3

....Senior Secured Revenue Bonds Dec 1, 2029, Affirmed Caa3

....Senior Unsecured Revenue Bonds Dec 1, 2029, Affirmed Caa3

The principal methodology used in this rating was Global Banks published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Joseph Pucella
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Franklyn Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's reviews for downgrade the ratings of three Puerto Rican banks
No Related Data.
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