Fitch drops Colonial BancGroup to CCC

Fitch Ratings said it downgraded Colonial BancGroup, Inc.'s long-term issuer default rating to CCC from B-, subordinated debt to C/RR6 from CCC/RR6 and short-term issuer default rating to C from B after subsidiary Colonial Bank entered into an order to cease and desist with the FDIC and the Alabama State Banking Department Tuesday.

Colonial Bank's long-term issuer default rating was lowered to B- from 'B+.

Ratings were placed on Rating Watch evolving.

In addition to the requirements to improve management, as well as certain policies and procedures, Colonial Bank is required to make improvements in asset quality and capital, the agency noted.

Escalating credit problems have continued to generate significant losses, further weakening the company's capital position and eroding the benefit of potential capital augmentations, Fitch said.

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