Moody's downgrades Citigroup

Moody's Investors Service said it lowered Citigroup Inc.'s senior debt to A3 from A2, senior subordinated debt to Baa1 from A3, the junior subordinated debt issued by various Citigroup Capital Trust vehicles to Baa3 from A3 and the preferred debt ratings to Ca from Baa3. The short-term rating at Citigroup was confirmed at Prime-1.

This conclude the review that began on Dec. 18. The outlook is stable for all ratings except for the junior subordinated debt rating, which has a negative outlook.

The agency said the downgrade was driven by its expectation that, the current level of government support notwithstanding, Citigroup will emerge from the current economic crisis with a different mix of core businesses and a smaller scale, which could diminish its relative importance to the U.S. banking system over the long run.

The multi-notch downgrade of the preferreds incorporates the expected loss resulting from the deferral of dividends on these non-cumulative instruments, which Moody's believes could last for several years.

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