S&P cuts some iStar debt to BB-

Standard & Poor's said it lowered the senior unsecured debt rating on iStar Financial Inc. to BB- from BB and affirmed its BB long-term counterparty credit rating and B- preferred stock rating. The senior unsecured rating was removed from CreditWatch with negative implications where it had been placed on April 10.

The outlook is negative.

"The downgrade of iStar's senior unsecured debt results from the May 2009 exchange offer, which increased the disadvantage of senior unsecured creditors relative to secured creditors," S&P analyst Jeffrey Zaun said in a statement.

The rating incorporates the belief that the amount of troubled assets could increase to more than $6 billion and that recoveries on troubled assets, which have been good so far, will deteriorate considerably, the agency noted.

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