S&P upgrades Korea Exchange Bank

Standard & Poor's upgraded Korea Exchange Bank including raising its $200 million 13.75% upper tier II subordinated notes due 2010 to B+ from B. The outlook is positive.

S&P said the upgrade is based on Korea Exchange Bank's strengthened capitalization through a cash injection of Korean won 1.075 trillion from Lone Star, a U.S. private equity fund, to be executed over the next few weeks. The capital injection will raise Korea Exchange Bank's tier 1 ratio to above 7% from 4.8% at June 2003.

With a strengthened capital base, Korea Exchange Bank will be able to expedite its cleanup of nonperforming assets, S&P said.

Remaining concerns include Korea Exchange Bank's asset quality, which is still vulnerable due to its relatively large exposure to card credit through consolidated subsidiary, Korea Exchange Bank Credit Service Co. Ltd., and Korean chaebols with relatively weak financial profiles, S&P added.

In addition, the bank's market position, which has declined relative to its domestic competitors as they undertake widespread consolidation, could limit its long-term ability to enhance its pricing power in funding, and may impact its ability to develop alliances with leading players in the nonbanking sector.

The positive outlook reflects the likelihood that the bank will improve its credit culture, backed by its strengthened capitalization, by implementing a more decisive credit policy in an effort to improve its asset quality in the future, S&P said.

Moody's puts Rayonier on review

Moody's Investors Service put Rayonier Inc. on review for possible downgrade including its senior unsecured debt, medium-term notes and industrial revenue bonds at Baa3.

Moody's said the review was prompted by Rayonier's recent announcement of its intent to change its corporate structure to a Real Estate Investment Trust.

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