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Boston condo buyers. First Republic Bank Junk Status

First Republic Bank, a major real estate lender, has seen its credit rating pushed to the back of the junkyard.

The rating of First Republic, once so conservative that it would not accept a deposit over $90,000 to ensure that all its accounts remained within FDIC insurance coverage, was ratcheted down Sunday.

Warning that still another cut could follow, S&P Global Ratings downgraded First Republic’s long-term issuer credit rating to B+ from its earlier ranking of BB+.

The drop came despite an infusion of $30 billion in uninsured deposits last week by 11 other banks trying to stabilize and boost confidence in the struggling lender. 

A rating of B+ is considered “junk” in that it suggests that credit issued by First Republic is not investment grade and runs a higher than average risk of default.  

The bank had already been lowered to BB+ which is the highest level of non-investment grade bond. Sunday’s downgrade, the second for First Republic in the past week, was first reported by Bloomberg.

In addition to lowering First Republic’s long-term issuer ratings on securities dated a year or longer to BB+, S&P Global also lowered its senior unsecured issue rating to B+, its subordinated issue rating to B-, and its preferred stock issue rating to CCC, according to the Chronicle.

S&P said the $30 billion provided by the nation’s largest banks wasn’t a long-term solution to its capitalization crisis.

Source: San Francisco Chronicle

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