Anglo Irish Bank Corp.'s subordinated debt rating was cut by Standard & Poor's Wednesday as market participants waited for details of the bank's total cost to the Irish government, expected Thursday.

Standard & Poor's downgraded the bank's lower tier 2 instruments to CCC from B, reflecting the "clear and present risk" of the debt being restructured.

Trading on the debt dropped half a point Wednesday, and was indicated at 25/26% of face value midmorning, according to a trader. Credit default swaps on the subordinated debt are illiquid and last priced at around 45-50 points upfront, according to another trader. "Right now it's wait-and-see," he said.

In contrast, the bank's senior debt traded up two points to around 86/87% of face value, as market participants grew more confident the paper would be backed by the government. Senior credit default swaps improved 17 basis points to 930, according to Markit.

CDS are tradable, over-the-counter derivatives that function like a default insurance contract for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Premiums are usually paid regularly over the term of the default protection contract, but if a borrower becomes distressed the protection seller will demand the premium for the life of the contract upfront.

Standard & Poor's move follows Moody's Investors Service Inc., which cut the bank's unguaranteed senior debt to Baa3 from A3 and dated subordinated debt to Caa1 from Ba1 on Monday.

Details of the final cost of reorganizing Anglo Irish are expected to be released late Thursday, with expectations puttign the figure around EUR30 billion, a strategist said. A capital injection is also possible, although the government could indicate it has a pot of money standing by, if required. A tender offer or exchange is likely for the subordinated debt.

An exchange offer would likely be characterized as "distressed" and the rating would be lowered to D, Standard & Poor's said. It also noted comments made by Irish Finance Minister Brian Lenihan supporting senior obligations, but not doing the same for subordinated instruments.

The developments come as the widespread unpopularity of the banking sector spills into street protests. A man was arrested Wednesday after crashing a cement mixer truck with "Toxic Bank Anglo" into the front gate of Ireland's parliament building in Dublin. Labor unions are also demonstrating against government austerity cuts and the Anglo Irish bailout.

Irish banks were hit particularly hard by the property crash. The banks needed the Irish government to pump in billions to recapitalize them after they made big loans to property developers, many of which are unlikely to be repaid.

So far, the government has spent EUR33 billion--or roughly 20% of its gross domestic product--rescuing banks.

By Irene Chapple, Dow Jones Newswires; 44 207 842 9291; irene.chapple@dowjones.com (Neil Shah in London contributed to this report)