Report title: Fitch Sees Elevated Risk of Bank Hybrid Capital Coupon Deferral in 2009
from Fitch Research
3 page (8743 word) report published Feb 04, 2009

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...Fitch Ratings believes that the coupon deferral risk of bank hybrid capital instruments has increased materially for the banks most under pressure in the current crisis. Significantly compressed operating earnings, including the growing universe of companies reporting outright losses, have been the primary factor in elevating the risk o f banks being able to service their most subordinated o bligations. Some rated entities have added hybrids in recent quarters to help shore up capital in the face of recent operating losses and to provide a buffer to absorb expected future losses or weak earnings. While the additional capital is helpful in some respects, the additional debt service burden created heigh tens the risk f or these entities as well and may hasten the onset of the hybrid instruments exhibiting their equity characteristics in the form of becoming more permanent (call options not being exercised) or serving...

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