Bankia Cut to BB- by S&P on Recapitalization Doubts

Bankia SA, the Spanish lender that needed the most European bailout funds, had its debt rating cut by Standard & Poor’s on concern that steps to strengthen its capital won’t be as effective as anticipated.

Standard & Poor’s cut its long-term debt rating on Bankia by one level to BB-, or three levels below investment grade, the ratings company said in a statement today.

The Bankia group posted a record after-tax loss of 21.2 billion euros ($27.6 billion) last year as it cleansed its balance sheet by transferring 22 billion euros of assets to a bad bank. The decision to cut the debt rating reflects S&P’s view that steps to strengthen capital by converting 6.5 billion euros of hybrid debt into equity “will not be as great as we previously expected,” S&P said.

S&P said it also downgraded Bankia (BKIA)’s parent company, cutting the long-term debt rating on Banco Financiero y de Ahorros by one level to B-. The negative outlook on both ratings reflects “the difficult operating environment and the risk that the bank’s restructuring plan might not prove successful,” S&P said.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.