(CPF) deduces baseball tickets and its conclude bank subsidiary Central PacificBank to 'B' and 'BB-' respectively. Fitch has also widened the notching on CPF'spreferred stock ratings due to the high risk of deferral. The preferred stockratings have been downgraded to 'CC' reflecting the financial condition of theholding company and its limited access to alternative liquidity sources withoutregulatory approval. The ratings have also been placed on Rating Watch Negative.A complete list of ratings follows at the end of this release. The two notch differential between the holding company and its bank subsidiaryreflect the holding company's limited amount of liquid assets and its restrictedaccess to alternative liquidity sources due to existing regulatory agreementsunder which the company and the bank are operating, At the same time, the banksubsidiary's capital position has been fortified by these actions, as all theproceeds ($135 million) of CPF's issuance of preferred stock to the U.S.Treasury was contributed to the bank subsidiary and dividends from the banksubsidiary to the holding company require prior regulatory approval. Beyond the near term liquidity concerns of the holding company, which is theprimary driver for the notching between the bank subsidiary and the holdingcompany, the rating action reflects Fitch's view that CPF will endure increasedcredit stress in its Hawaii portfolio given the weakening Hawaii economy, aswell as in its still sizeable exposure to California commercial real estate.Both portfolios have been showing signs of weakness and Fitch expects higherloss rates from these portfolios.
With earnings and capital already having beenimpacted by its California residential real estate exposure, the company hasless capacity to absorb material losses in the other segments of its loan book.Fitch believes that CPF needs to bolster its capital base in order to absorbexpected higher losses, as well as provide needed liquidity at the parentcompany cubs rooftop . Further, given its franchise and product concentrations, as well as itslimited earnings diversity, Fitch has always expected CPF to maintain enhancedlevels of capital and reserves . The Negative Rating Watch reflects the prospect that if the holding company isunable to bolster its financial resources in the near term and its access toliquidity remains restricted; the company will likely have to defer on itspreferred stock dividend, as well as on the dividends of its trust preferredsecurities . This would result in a further downgrade of the company's ratings.The Negative Rating Watch also considers the prospect of more pronounced creditdeterioration, than currently anticipated, in either the mainland commercialreal estate book, or more significantly, in the Hawaii portfolio . Should thisoccur, Fitch would likely downgrade CPF's ratings further.
Fitch assigns recovery ratings to individual security issues where the IDR ofthe issuer is rated in the single-B or below category kansas city royals . As such, Fitch hasassigned a recovery rating of 'RR6' to the preferred and trust preferredsecurities of CPF, which implies recovery between 0%-10% on these securities inthe event of failure or default by the issuer . CPF is a $5.4 billion banking company headquartered in Honolulu, HI . CPFprovides a full range of traditional commercial consumer and banking services.Through its bank subsidiary, Central Pacific Bank, the company operates 39branches through-out Hawaii .
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