Moody’s Lowers Ratings for Glendale Federal

Moody’s Investors Service Inc. has lowered its ratings of Glendale Federal Bank for certain of the thrift’s long-term deposits, to single-B-3 from single-B-1, and cut its rating of Glendale Federal’s subordinated debt to Ca from Caa.

Moody’s also cut its rating for the subordinated debt of Glendale Federal’s holding company, Glenfed Inc., to single-C from Ca. A total of about $96 million in long-term debt is affected, the New York-based rating agency said.

The long-term deposits affected by the ratings change are uninsured, meaning they are the deposits greater than the $100,000 maximum amount that the U.S. government insures per depositor, Moody’s said.

The lower ratings, which would effectively lift the company’s borrowing costs in the future, are in response to Glenfed’s recent announcement that it might not be able to make interest payments on certain of its debt due in March. Glenfed said that omission could allow its bondholders to initiate involuntary bankruptcy proceedings against Glenfed.

Moody’s said a Glenfed bankruptcy, in turn, could cause regulators to seize Glendale Federal in order to protect the thrift from the parent company’s creditors.