DBRS Downgrades USB Capital IX to “A”, Trend Stable

DBRS, Inc. (DBRS) has today downgraded USB Capital IX (“ITS”) securities (USB IX or the Trust) to “A” from AA (low).

DBRS noted that today’s rating action applies only to the specific denoted security that has unique structural characteristics. To be clear, all debt ratings of U.S. Bancorp (USB) and its banking subsidiary, U.S. Bank National Association, remain unchanged, including the ratings of USB’s underlying Junior Subordinated Debt and Preferred Shares.

As a result of the successful remarketing of U.S. Bancorp’s 3.442% Junior Subordinated Notes Due 2016 on January 27, 2011, the assets in USB Capital IX’s trust, previously Junior Subordinated Notes, are scheduled to change to Preferred Shares on April 15, 2011. DBRS noted there is now near certainty that the net cash proceeds from the successful remarketing will be used by the Trust to purchase 6,763.78 shares of U.S. Bancorp Series A Non-Cumulative Perpetual Preferred Stock per the terms of a forward purchase contract. The downgrade reflects the fact that USB Capital IX is an “ITS” structure trust security and the Trust is expected to hold only U.S. Bancorp Series A Perpetual Preferred Stock as of April 15, 2011.

As an application to DBRS’s methodology, hybrid securities that eventually convert to Preferred Shares or convert to Preferred Shares under stress are rated at the same level as Preferred Shares. Per DBRS methodology, U.S. Bancorp Preferred Shares are rated at “A”, three notches below U.S. Bancorp’s Issuer & Senior Debt rating of AA with a Stable Trend.

Notes:
All figures are in U.S. Dollars unless otherwise noted.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organizations, Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments, Rating Bank Subordinated Debt and Hybrid Instruments with Discretionary Payments, and Rating Bank Preferred Shares and Equivalent Hybrids which can be found on the DBRS website under Methodologies.

The sources of information used for this rating include the company documents, company presentations, company call transcripts, the Federal Deposit Insurance Corporation and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: William Schwartz
Approver: Alan G. Reid
Rating Committee Chair: Alan G. Reid
Initial Rating Date: 1 November 2006
Most Recent Rating Update: 08 June 2010

For additional information on this rating, please refer to the linking document below.