Analyst Upgrades Popular On Exchange Offer

NEW YORK (AP) — An analyst upgraded Popular Inc. Wednesday after the Puerto Rican financial services company announced an exchange offer to raise common equity and suspended preferred dividends.

Shares jumped 28 cents, or 11.4 percent, to $2.73 in afternoon trading.

The move earlier this week prompted Moody's Investor Service to downgrade ratings for Popular and the bank it operates, Banco Popular de Puerto Rico, on the expectation of increased credit losses.

But Sterne Agee analyst Adam Barkstrom wrote in a client note that the exchange offer will boost the company's tangible book value above previous estimates. Still, profitability will likely not occur until 2011, said Barkstrom, who upgraded the company to "Neutral" from "Sell."

Barkstrom increased his estimates to a loss of $1.16 for 2009 from $1.43, and a loss of 4 cents for 2010 from 42 cents.

On Tuesday, Moody's cut Banco Popular de Puerto Rico's financial strength rating to D+ from C, and the bank's long-term deposits to Baa2 from A3.

Moody's also lowered debt ratings of Popular Inc. The company's senior unsecured rating was reduced to Ba1 from Baa1, its subordinated rating to Ba2 from Baa2 and its preferred rating to Ca from Baa3.

All the ratings, other than the preferred rating of the holding company, remain on review for possible downgrade, the rating agency said.

Shares of Popular have traded between $1.42 and $12.45 during the past year.