NEW YORK – Fitch Ratings dealt U.S. Central FCU a strong blow yesterday, downgrading U.S. Central's Issuer Default Rating to "AA" from "AA+", blaming an expectation of additional investment losses "that are meaningful in relation to the company's capital base and earnings capacity."
Even more stunning was the downgrade of U.S. Central's Individual Rating from 'A' to 'D'. In Fitch's official release, Senior Director Ken Ritz explained that U.S. Central's investment losses threaten its capital position, and the aggregate corporate's funding and liquidity positions have eroded; however, the credit union's key industry role ensures a high probability of external support.
Fitch's IDR ratings consider that likelihood of support, such as recent NCUA initiatives to improve corporate positions; however, Individual Ratings do not.
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"The Individual rating … is an assessment of the company on a stand-alone basis and independent of external support," Ritz wrote. "Thus, concerns regarding further weakening in the credit fundamentals of USC are reflected in the 'D' Individual rating (Scale: A thru F) and the Rating Watch Negative.
"Fitch would view positively further efforts to strengthen USC's capital position. If losses remain manageable and do not materially affect USC's capital base while the company's other credit fundamentals remain intact, that would also have positive rating implications."
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