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NEW YORK — Standard & Poor's Ratings Services on Wednesday upgraded online retail broker E-Trade Financial Corp.'s credit ratings after its newly completed debt exchange, but kept the ratings within junk territory.
S&P raised E-Trade's credit rating one notch to 'CCC' from 'CC'. The upgrades come after the New York-based company said Tuesday it had closed a $1.74 billion debt exchange offer. E-Trade has been trying to reduce its debt burden and bolster its capital position as it continues to face losses from real estate-related investments. Exchanging the debt allows it to cut interest payments and fortify its ownership base.
S&P said the exchange "modestly improves the holding company's funding structure by lengthening debt maturities and materially lowering interest-servicing requirements." However, S&P added that E-Trade "still carries a relatively large amount of long-term debt on its balance sheet, and the subsidiary bank remains burdened with serious asset-quality difficulties."
S&P assigned a stable outlook for the ratings.
S&P said its new ratings "consider our opinion that E-Trade's financial condition remains weak and operating performance is poor. The company has not been profitable during the past two years and we expect earnings and operating cash flows to remain weak through the second half of 2009."
Shares of E-Trade gained 5 cents, or 3.7 percent, to $1.40 in afternoon trading.
