Fitch drops Colonial to junk

Fitch Ratings said it downgraded Colonial Bancgroup, Inc.'s long-term issuer default rating to BB from BBB-, short-term issuer default rating to B from F3, subordinated debt to BB- from BB+ and individual rating to C/D from C.

The agency placed ratings on negative watch.

Credit problems have accelerated beyond expectations, with credit costs increasing beyond manageable levels, materially affecting the company's earnings, the agency said.

The downgrade reflects the prospect of prolonged credit stress, which will continue to hamper the company's performance and weigh heavily on its financial condition, Fitch said.

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