S&P puts Tokai Preferred on positive watch

Standard & Poor's said it placed its D rating on the preferred securities of Tokai Preferred Capital Co. LLC on CreditWatch with positive implications, reflecting strengthening prospects that dividend payments on the securities will resume. Tokai Preferred is the operating company of UFJ Bank Ltd. (A/stable/A-1).

S&P also said it affirmed its counterparty ratings, bank fundamental strength rating and bank survivability assessment on UFJ Bank.

S&P said that according to the terms of issuance, UFJ's payments on other Tier 1 securities cannot be made even if the dividends on the operating company's securities are resumed. This issue is scheduled to be resolved in December with actual payments to be made at the beginning of January.

However, concerns on nonpayment of dividends are receding following improvement in the bank's financial condition. Its weak financial health was the official reason given by the bank for suspending payments in May, S&P said.

Furthermore, S&P said the bank is likely to avoid missing payments, as this would negatively impact its reputation just prior to its merger with Bank of Tokyo-Mitsubishi Ltd. (A/stable/A-1).

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