Moody's drops Kaupthing to Caa2

Moody's Investors Service said it downgraded Kaupthing Bank hf.'s long-term senior debt ratings to Caa2 from Ba1, subordinated debt to C from Ba2 and its preferred stock to C from B1.

The bank's short-term rating was downgraded to Not-Prime from P-3. Ratings remain on review for further downgrade.

"Kaupthing's U.K.-based subsidiary, Kaupthing Singer & Friedlander, was placed into administration yesterday and this led to Kaupthing's default on its obligations, thus prompting today's multi-notch downgrade of the bank," Kimmo Rama, a vice president at Moody's, said in a written statement.

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