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New York Community Capital Trust V — Moody’s affirms the ratings for New York

Rating Action: Moody’s affirms the ratings for New York Community Bancorp (long-term issuer Baa3) and Flagstar Bancorp (long-term issuer Baa3) following merger announcement; outlook stableGlobal Credit Research – 26 Apr 2021New York, April 26, 2021 — Moody’s Investors Service (“Moody’s”) has affirmed the long-term debt and deposit ratings, and assessments of New York Community Bancorp, Inc. (NYCB) and its subsidiaries, including the baa2 baseline credit assessment (BCA) of its bank subsidiary New York Community Bank. In the same action, it has also affirmed the ratings and assessments of Flagstar Bancorp, Inc. (Flagstar) and its bank subsidiary, Flagstar Bank (FSB), including the bank’s baa2 BCA. This followed today’s announcement that NYCB has agreed to acquire Flagstar in an all-stock transaction, which the companies expect to close by the end of the year, subject to regulatory and shareholders approvals. The rating outlooks for all entities remain stable.The rating affirmations reflect Moody’s expectation that following the completion of the acquisition, the standalone credit profile for the combined entity will remain broadly in line with those of each bank, which are expressed by their current baa2 BCAs. While the merger will likely yield benefits to creditors, it also introduces operational and integration risks.A complete list of affected ratings and entities can be found at the end of this press release.RATINGS RATIONALEThe rating actions on NYCB’s and Flagstar’s ratings follow the banks’ announcement that they will merge in an all-stock transaction. NYCB and Flagstar had total assets of $58 billion and $29 billion, respectively, as of 31 March 2021. Management expects the transaction to close in the fourth quarter of 2021, subject to regulatory and shareholder approvals. NYCB’s shareholders will have an ownership stake of approximately 68% of the merged company.The transaction combines NYCB’s and Flagstar’s regional US retail and commercial banking franchises, which have very little business and geographic overlap. Both banks operate noncontiguous branch networks, with NYCB headquartered in New York, and Flagstar headquartered in Michigan. Flagstar is also a national mortgage originator and servicer. The combined organization’s $87 billion of total assets and combination of products and geographic markets, will have increased diversification and scale. The transaction will also reduce NYCB’s concentration in investor-owned commercial real estate (CRE) loans, primarily in New York City, from about 10 times its Moody’s tangible common equity (TCE) to about 7 times its TCE, on a combined basis.Moody’s noted that this is a large acquisition, with Flagstar’s total assets equaling about 50% of NYCB’s assets at 31 March 2021. NYCB has considerable acquisition experience, but its last large transaction was executed in 2009. The acquisition creates operational and integration risks and governance challenges but also brings greater…

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