Fitch cuts IndyMac long-term ratings

Fitch cut IndyMac Bancorp's rating to "CC" from "B-" and its banking unit, IndyMac Bank FSB, to "CCC" from "B." Both the new and old ratings are considered non-investment grade, or "junk." The new ratings indicate IndyMac faces substantial risk of defaulting on its obligations.

Fitch cut the ratings because of IndyMac's "weakening capital position" and the likelihood it will not be able to raise new cash from external investors. While facing difficulty raising cash from outside investors, IndyMac also faces significant struggles to raise capital within, since its "existing businesses are not profitable, new loan production has been curtailed and the company faces additional write-downs on its mortgage securities portfolio," Fitch said in a statement.

IndyMac's chief executive, Michael Perry, said in a letter to shareholders Monday the Pasadena, Calif., company is working with regulators on a plan to improve its capital position.

On Monday, IndyMac said it has stopped accepting new loan submissions in its main mortgage lending divisions and plans to slash 3,800 jobs, or more than half of its work force.

Shares of IndyMac fell 34 cents, or 47.9 percent, to 37 cents in midday trading.