March 25 (Bloomberg) -- 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’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.
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