Magazine article American Banker

MBNA Seen Due for Debt Downgrade; Move Would Weaken It as a Competitor

Magazine article American Banker

MBNA Seen Due for Debt Downgrade; Move Would Weaken It as a Competitor

Article excerpt

It may be just a matter of time before Moody's Investors Service lowers its ratings on MBNA Corp., market sources said.

Moody's has higher ratings on the nation's second-largest credit card issuer than any other rating agency. But it has had MBNA on 'negative outlook' off and on for the past year and a half, prompting some observers to predict the rating could be lowered.

"Yes, I think it is a possibility," said bank bond analyst Eric Grubelich of Keefe, Bruyette & Woods Inc. "I think the level of common equity capital is a real sticking point between MBNA and the ratings agency."

Moody's analyst David Fanger wouldn't predict future actions, but expressed concern over rising delinquencies and chargeoffs in MBNA's credit card portfolios. And he said Moody's is also keeping a close eye on the Wilmington, Del., company's rising leverage ratio.

A rating downgrade could make it more expensive for MBNA to raise capital, because investors would insist on higher yields. If the company's leverage is indeed too high, the company may be forced to curtail the growth that has made it such a fearsome competitor to banks.

Moody's rates MBNA's bank deposits A2, and the parent company's senior debt A3. Standard & Poor's long-term rating on the MBNA is A-, while is short-term rating is A2. S&P put MBNA on negative outlook in April said Standard & Poor's analyst Thomas Abruzzo, adding that concerns over the company's leverage could lead to a downgrade within a year. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.