S&P lowers Downey Financial

Standard & Poor's said it lowered its long-term ratings on Downey Financial Corp., including lowering the long-term counterparty credit rating to CCC- from B-. The short-term counterparty credit rating was affirmed at C.

The outlook is negative.

The agency said it took this action because it believes Downey's asset-quality-induced weakened financial profile leaves its creditworthiness severely impaired. Quarterly losses have eroded capital to the point where S&P believes it will be very difficult for Downey to maintain adequate capital.

The cease-and-desist order that the U.S. Office of Thrift Supervision issued in September requires Downey Savings Bank to satisfy increased minimum capital requirements and raise new equity by no later than Dec. 31. In S&P's view it will be difficult to maintain capital above these new requirements in the near term without raising capital, which the agency feels is highly unlikely given the current market turmoil and approaching year-end deadline.

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