Fitch downgrades hundreds of preferreds, hybrids

Fitch Ratings said it downgraded hundreds of preferred and hybrid capital instruments issued by banks, other non-bank financial institutions and issuers in the insurance sector in accordance with its revised hybrid notching criteria.

The agency said the new guidelines typically resulted in downgrades of one notch for many deferrable instruments that are currently performing, while those performing hybrids with more material loss-absorption provisions or with triggers for loss absorption that are easily triggered were subject to a downgrade of two notches or more.

Fitch said its previous notching methodology for hybrid securities did not explicitly consider the risk of going-concern loss absorption, such as deferral risk, as a factor unless deferral appeared likely or had occurred. Under its revised methodology, the agency now considers the presence of a going concern loss absorption feature as a risk to be reflected in ratings even in periods when the likelihood of deferral appears remote.

In the insurance sector, the agency downgraded:

• ACE Capital Trust II's 9.7% junior subordinated deferrable interest debentures due 2030 to BBB+ from A-;

• Allianz SE's $2 billion 8.375% fixed-rate perpetual subordinated notes and Allianz Finance II BV's $500 million 7.25% fixed-rate perpetual subordinated notes to A from A+;

• Allstate Corp.'s 6.125% junior subordinated debentures and 6.5% junior subordinated debentures to BBB- from BBB;

• Ameriprise Financial Inc.'s 7.518% junior subordinated debentures due 2066 to BBB from BBB+;

• Aon Corp.'s 8.205% junior subordinated deferrable interest debentures due 2027 to BBB- from BBB;

• Arch Capital Group, Ltd.'s 7.875% perpetual series B preferred shares and 8% perpetual series A preferred shares to BBB from BBB+;

• Assured Guaranty US Holdings Ltd.'s 6.4% junior subordinated debentures due 2066 to BBB from BBB+;

• AXA's $750 million variable-rate callable subordinated perpetual notes to BBB from BBB+;

• Chubb Corp.'s 6.375% junior subordinated debentures to A- from A;

• Endurance Specialty Holdings Ltd.'s 7.75% non-cumulative perpetual preferreds to BBB- from BBB;

• Everest Reinsurance Holdings, Inc.'s 6.6% long-term subordinated notes (LoTS) and Everest Re Capital Trust II's 6.2% trust preferred securities due 2034 to BBB+ from A-;

• Financial Security Assurance Holdings Ltd.'s 6.4% junior subordinated debentures due 2066 to BBB from BBB+;

• First American Capital Trust's 8.5% junior subordinated notes due 2012 to BB- from BB;

• Fortis Hybrid Financing's $750 million 8.25% perpetual callable subordinated notes to BB+ from BBB-;

• Great-West Lifeco Finance (Delaware) LP's 7.127% deferrable debentures due 2068 and 5.691% deferrable debentures due 2067 as well as Great-West Life & Annuity Insurance Capital LP's 6.625% deferrable debentures due 2034 and Great-West Life & Annuity Insurance Capital, LP II's 7.153% deferrable debentures due 2046 to A- from A;

• Hanover Insurance Group, Inc.'s 8.207% junior subordinated debentures due 2027 to BB from BB+;

• Liberty Mutual Group, Inc.'s 7% junior subordinated notes, 7.8% junior subordinated notes and 10.75% junior subordinated notes to BB from BB+;

• MetLife, Inc.'s 10.75% junior subordinated debentures, 6.4% junior subordinated debentures and non-cumulative perpetual preferred as well as MetLife Capital Trust IV's 7.875% X-SURPS and MetLife Capital Trust X's 9.25% X-SURPS to BBB+ from A-;

• MMI Capital Trust I's 7.625% trust preferred securities due 2027 to BBB+ from A-;

• Montpelier Capital Trust III's 8.55% notes due 2036 to BB+ from BBB-;

• Nationwide Financial Services, Inc.'s 7.899% junior subordinated debentures to BB+ from BBB-;

• Odyssey Re Holdings Corp.'s floating-rate non-cumulative perpetual preferreds and 8.125% non-cumulative perpetual preferreds, series A to BB from BB+;

• PartnerRe Ltd.'s 6.44% junior subordinated notes due 2066 to A- from A;

• PLC Capital Trust III's 7.5% trust preferreds due 2031, PLC Capital Trust IV's 7.25% trust preferreds due 2032 and PLC Capital Trust V's 6.125% trust preferreds due 2034 to BB+ from BBB-;

• Principal Financial Group, Inc.'s 6.518% redeemable preferreds and 5.563% redeemable preferreds to BBB from BBB+;

• Progressive Corp.'s 6.7% junior subordinated notes to BBB+ from A-;

• Protective Life Corp.'s 7.25% junior sub-basket D securities due 2066 to BB+ from BBB-;

• Provident Financing Trust I's 7.405% junior subordinated debentures due 2038 to BB from BB+;

• Prudential Financial, Inc.'s 8.875% fixed-to-floating junior subordinated notes due 2068 and 9% junior subordinated debentures due 2068 to BB+ from BBB-;

• Reinsurance Group of America, Inc.'s 5.75% PIERS due 2051 and RGA Capital Trust I's 6.75% junior subordinated notes due 2065 to BBB- from BBB;

• Selective Insurance Group, Inc.'s 7.5% junior subordinated notes due 2066 to BBB- from BBB;

• StanCorp Financial Group, Inc.'s 6.9% APM junior subordinated debentures to BBB- from BBB;

• Symetra Financial Corp.'s 7.405% junior subordinated notes due 2038 to BBB- from BBB;

• Torchmark Capital Trust III's 7.1% cumulative five-year deferrable callable trust preferreds to BBB- from BBB;

• Travelers Cos., Inc.'s 6.25% junior subordinated debentures due 2037 to BBB+ from A-;

• USF&G Capital Trust I's 8.5% trust preferred securities due 2045 and USF&G Capital Trust III's 8.312% trust preferred securities due 2046 to BBB+ from A-;

• W.R. Berkley Capital Trust II's 6.75% junior subordinated notes due 2045 to BBB- from BBB;

• White Mountains Re Group, Ltd.'s 7.506% non-cumulative perpetual preference shares to BB+ from BBB-;

• XL Capital Ltd.'s 6.102% cumulative preference shares series C and 6.5% perpetual non-cumulative preference shares series E to BB+ from BBB-;

• Zenith National Insurance Capital Trust I's 8.55% junior subordinated notes due 2028 to BB+ from BBB-; and

• ZFS Finance (USA) Trust IV's $500 million variable-rate callable trust preferred securities and $1 billion variable-rate callable trust preferred securities to BBB+ from A-.

In the banking and financial sector, the agency downgraded:

• American Express Co.'s subordinated debt to A- from A;

• Banco Bilbao Vizcaya Argentaria's $240 million non-cumulative preference shares and $600 million variable-rate perpetual guaranteed preference shares to A- from A;

• Banco Bradesco SA's subordinated notes to BBB- from BBB;

• Banco de Chile and subsidiaries' subordinated bonds to BBB+ from A- and their $69 million 9.875% non-cumulative preference shares, $500 million 6.8% preference shares, $350 million floating-rate preference shares due 2017, $600 million 6.5% perpetual non-cumulative callable preference shares, $190 million 6.41% non-cumulative guaranteed perpetual series 1 preferred securities, $161.5 million variable-rate non-cumulative tier 1 guaranteed perpetual callable preferred securities and $825 million 10.5% non-cumulative tier 1 guaranteed perpetual callable preferred securities to A from A+ and $1.5 billion variable-rate perpetual callable subordinated notes to A+ from AA-;

• The trust preferreds of Bank of New York Mellon Corp. subsidiaries BNY Capital IV, BNY Capital Trust V, BNY Institutional Capital Trust A, BNY Institutional Capital Trust A and Mellon Capital IV to A from A+;

• Barclays Bank plc's $1 billion variable-rate callable non-cumulative preference shares, $1.35 billion step-up callable perpetual reserve capital instruments, $1.25 billion step-up callable perpetual reserve capital instruments, $55 million 7.1% subordinated callable perpetual notes, $1.25 billion variable-rate callable subordinated perpetual notes, $1 billion 7.75% non-cumulative callable perpetual preference shares, $2.65 billion 8.125% callable subordinated perpetual preference shares, $2 billion variable-rate callable subordinated perpetual notes, $750 million 6.625% callable perpetual preference shares, $750 million variable-rate callable perpetual subordinated notes and $1 billion variable-rate callable perpetual subordinated notes to A from A+;

• BBVA Bancomer's subordinated notes to BBB+ from A-;

• Charles Schwab Corp. subsidiary Schwab Capital Trust I's trust preferreds to BBB+ from A-;

• Columbia Financial, Inc. subsidiary Columbia Financial Capital Trust I's trust preferreds to BB+ from BBB-;

• Commonwealth Bank of Australia's $700 million 6.024% perpetual callable notes to A from A+;

• Credit Agricole SA's $1.5 billion variable-rate perpetual callable subordinated hybrid notes and $1 billion variable-rate callable subordinated perpetual notes to A from A+;

• Credit Suisse Group AG's $61 million 7.9% guaranteed callable subordinated perpetual notes and Credit Suisse International's $750 million floating-rate perpetual callable subordinated notes to A from A+;

• Cullen/Frost Bankers, Inc. subsidiary Cullen/Frost Capital Trust II's trust preferreds to BBB from BBB+;

• DBS Bank's $850 million 7.125% subordinated notes 15 May 2011 to A from A+;

• Deutsche Bank subsidiaries Deutsche Bank Capital Funding Trust IX's $1.15 billion non-cumulative trust preferred securities, Deutsche Bank Capital Funding Trust X's $700 million non-cumulative trust preferred securities, Deutsche Bank Contingent Capital Trust II's $800 million trust preferred securities, Deutsche Bank Contingent Capital Trust III's $1.75 billion trust preferred securities and Deutsche Bank Contingent Capital Trust V's $1.27 billion trust preferred securities to A from A+;

• Dime Community Bancshares, Inc. subsidiary Dime Community Capital I's trust preferreds to BB+ from BBB-;

• First Horizon National Corp. subsidiary First Tennessee Bank, NA's preferreds to BBB- from BBB;

• Fulton Financial Corp. subsidiary Fulton Capital Trust I's trust preferreds to BBB from BBB+;

• HSBC Finance Corp.'s preferreds, HSBC Finance Capital Trust IX's trust preferreds and HSBC Finance Capital Trust IX's trust preferreds to A from A+;

• HSBC Holdings plc's $1.25 billion non-cumulative step-up perpetual preferred securities and $2 billion fixed-rate callable perpetual preference shares to A+ from AA-;

• HSBC USA Inc.'s preferreds and the trust preferreds of HSBC Americas Capital Trust I, HSBC Americas Capital Trust II, Republic New York Capital I and Republic New York Capital II to A+ from AA-;

• Icici Bank Ltd.'s $750 million floating-rate subordinated notes due 2022 BB- from BB;

• JPMorgan Chase & Co.'s preferreds, JPMorgan & Co., Inc.'s preferreds and the trust preferreds of Bank One Capital Trust III, Bear Stearns Capital Trust III, Chase Capital II, III and VI, JPM Capital Trust II, First Chicago NBD Capital I and JPMorgan Chase Capital X, XII, XIII, XIV, XIX, XV, XVI, XVII, XVIII, XX, XXI, XXII, XXIII, XXIV, XXV, XXVII and XXVIII to A from A+;

• National Australia Bank Ltd.'s $800 million variable-rate callable subordinated perpetual notes to A from A+;

• New York Community Bancorp subsidiaries Richmond County Capital Corp.'s convertible preferred securities, Richmond County Capital Corp.'s convertible preferred securities, Roslyn Real Estate Asset Corp.'s preferreds and Roslyn Real Estate Asset Corp.'s preferreds to BB+ from BBB-;

• Nordea Bank AB's $1 billion variable-rate subordinated perpetual notes and $600 million non-cumulative fixed/floating capital securities to A from A+;

• The trust preferreds of Northern Trust Corp. subsidiaries NTC Capital I and NTC Capital II to A from A+;

• PNC Financial Services Group, Inc.'s preferreds, the trust preferreds of Fort Wayne Capital Trust I, National City Capital Trusts II through IV, PFGI Capital Corp., PNC Capital Trusts C through E and PNC Preferred Funding Trusts I through III and the preferreds of National City Corp. and National City Preferred Capital Trust I to A- from A;

• The trust preferreds of Popular, Inc. subsidiaries BanPonce Trust I, Popular Capital Trust I, Popular Capital Trust II and Popular North America Capital Trust I to CC from CCC;

• Rabobank Group's $1.75 billion variable-rate callable perpetual notes, $1.5 billion variable-rate perpetual non-cumulative callable tier 1 capital securities and $754 million variable-rate non-cumulative preferred securities to AA- from A;

• RBC Bancorp. (USA) subsidiary RBC Centura Capital Trust I's trust preferreds to A+ from AA-;

• Santander UK plc's $500 million 7.375% tier 1 perpetual subordinated debt securities and $450 million 7.375% preference shares to A from A+;

• Skandinaviska Enskilda Banken's $600 million variable-rate callable subordinated perpetual capital contribution securities to A- from A;

• Societe Generale's $1.1 billion variable-rate callable perpetual subordinated notes to A- from A;

• The trust preferreds of Sovereign Bancorp, Inc. subsidiaries ML Capital Trust I, ML Capital Trust I, ML Capital Trust I and Sovereign Capital Trusts I, IV, V and VI and the preferreds of Sovereign Real Estate Investment Trust Holdings to A from A+;

• Standard Chartered plc's $750 million floating-rate non-cumulative preference shares and $1.25 billion variable-rate perpetual callable preference shares to A- from A;

• TD Bank US Holding Co. subsidiary Northgroup Preferred Capital Corp.'s trust preferredsto A from A+;

• U.S. Bancorp's preferreds and the trust preferreds of Firstar Capital Trust I, Mercantile Capital Trust I, Star Capital I, USB Realty Corp. and U.S. Bancorp Capital I, IX, VI, VII, VIII, X, XI, XII and XIII to A from A+;

• UnionBanCal Corp.'s trust preferreds to BBB from A-; and

• United Overseas Bank's $1 million 4.5% subordinated notes due 2013 to A from A+.

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