Fitch downgrades Astoria Financial

Fitch Ratings said it downgraded Astoria Financial Corp.'s long-term issuer default rating and senior unsecured debt to BBB- from BBB+, short-term issuer default rating to F3 from F2 and individual rating to C/D from B/C and Astoria Capital Trust I's preferred stock to BB- from BBB. The company's 5 support rating and "No Floor" support floor were affirmed.

The outlook is negative.

The agency said the downgrade reflects its belief that Astoria will continue to suffer continued deterioration of asset quality over the next several quarters, aggressive capital management and additional pressure on operating performance.

Fitch is concerned about the management of liquidity at the holding company needed to service its senior unsecured and junior subordinated securities. In the agency's estimation, at Dec. 31, 2008, marketable assets available for debt service would only allow for approximately one year of payments on this debt.

The negative outlook reflects Fitch's view on the potential rating implications if profitability does not allow for capital generation, at a time when the risk of losses from the loan portfolio has increased.

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