Midlantic Corp.'s debt has been upgraded by Standard & Poor's and Duff & Phelps since the recent consummation of the New Jersey bank's merger with PNC Bank Corp.

S&P raised its rating on Midlantic's senior debt to A-minus from BBB and that on subordinated debt to BBB-plus from BBB-minus. Duff & Phelps raised the senior debt to A-plus from BBB-plus, and the subordinated debt to A from BBB.

S&P estimated that approximately $575 million of debt is affected by the rating action.

The upgrades underscore the benefits of consolidation for bank bondholders.

"Banks are taking capacity out," said Ann Robinson, a bank bond analyst at Bear, Stearns & Co.

"It's very positive," she said. "The equity holders may not benefit in every case, but bondholders are benefiting, because it's taking capacity out of the industry, improving the diversity, asset mix, and liability mix."

S&P cited the higher ratings of PNC in its Midlantic upgrade.

"Midlantic creditors benefit from the association with the significantly larger, more diverse, and higher-rated PNC Bank Corp.," S&P reported. "The merger established PNC as a major bank in New Jersey and reinforces its existing market position in eastern Pennsylvania."

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