KBRA cuts Silvergate to junk

KBRA said it downgraded Silvergate Capital Corp.’s senior unsecured debt rating to BB+ from BBB and preferred stock rating to B from BBB-. Additionally, KBRA lowered the ratings for Silvergate Bank, including the senior unsecured debt ratings to BBB- from BBB+, the subordinated debt rating to BB+ from BBB.

The agency also resolved its watch on Silvergate.

“The resolution of the watch and downgrade of ratings coincides with the company's public disclosure of a material contraction in Silvergate's digital asset deposits during 4Q22, as well as the likely reduction in core capital buffer driven by the liquidation of a considerable portion of SI's securities portfolio which, while high quality, forced the crystallization of significant AOCI losses during the quarter.

“That said, maintenance of the extremely liquid balance sheet position currently, with cash and cash equivalents of $4.6 billion, which remains in excess of digital asset deposits, is instrumental to the preservation of an investment-grade deposit rating for Silvergate Bank at this juncture,” KBRA said in a press release.

The outlook is negative.

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