Moody's downgrades Carolina First

Moody's Investors Service said it downgraded Carolina First Bank's bank financial strength rating to E from D, issuer rating to Ca from Ba3, senior unsecured OSO rating to Ca from Ba3 and senior unsecured deposit and note/takedown ratings to Caa1 from Ba2.

The outlook is negative.

The rating action follows the announcement of parent company South Financial Group, Inc.'s third-quarter results, which included a $340 million loss to common shareholders. Moody's said the downgrade reflects its opinion that South Financial's credit costs are likely to remain high and, coupled with the inability to recognize the tax benefit of losses going forward, the bank's capital position may rapidly deteriorate.

The negative outlook reflects the agency's view that, given South Financial's credit concentrations and the uncertain economic environment, expected losses for uninsured depositors and other creditors could increase.

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