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MBIA Slashed Sub-Investment Grade
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ShareNote: We are re-issuing this post after correcting a mistake in the original post that ran yesterday.
As a result of another sign of dwindling confidence about MBIA Incorporated’s (MBI) business prospects, Standard & Poor's (S&P) has downgraded its ratings on the parent company as well as its structured finance insurance arm, MBIA Insurance Corporation.
Rating of the parent company has been slashed to “BB-“ from “BB” and its subsidiary MBIA Insurance Corporation’s rating has been slashed to “BB+” from “BBB”. The ratings for both the parent and the subsidiary are now below investment grade. The rating agency holds a negative outlook on the ratings, which means that there could be additional downgrades if the company incurs further losses.
The rating action follows concerns about the company's exposure to residential mortgage-backed securities and collateralized debt obligations that it delved into during the heights of credit boom, and that it might incur further losses on these exposures.
S&P also affirmed its ratings on the company’s municipal bond insurance unit, National Public Finance Guarantee, at “A” (the sixth highest investment grade) with a developing outlook. In February 2009, after receiving the required regulatory approvals, the company established and capitalized the municipal bond insurance unit. This was done to separate its municipal bond insurance business from its riskier operations. Improving business acceptance could lead to a rating in the “AA”' category, alternatively, an ongoing lack of market acceptance and continued weak financial flexibility could result in a downgrade to the “BBB” category.
Its loss of a “AAA” rating since the second quarter of 2008 has resulted in a dramatic reduction in the company’s business activities. Moody’s (MCO) also rate MBIA Insurance Corporation at “B3” with a negative outlook, reflecting the risks associated with the ongoing litigation challenges related to the company’s recent restructuring efforts.
Peer Ambac Financial Group (ABK) has also been facing tough times since the onset of the subprime mortgage crisis. It has also seen multiple ratings downgrades since June 2008. At present, the long-term senior unsecured debt of Ambac is rated “CC” by S&P and “Ca” by Moody’s with a negative outlook. Ambac’s principal financial guarantee operating subsidiary, Ambac Assurance Corporation, has a “CC” financial strength rating from S&P, and a “Caa2” financial strength rating from Moody’s, with a developing outlook.
Rating of the parent company has been slashed to “BB-“ from “BB” and its subsidiary MBIA Insurance Corporation’s rating has been slashed to “BB+” from “BBB”. The ratings for both the parent and the subsidiary are now below investment grade. The rating agency holds a negative outlook on the ratings, which means that there could be additional downgrades if the company incurs further losses.
The rating action follows concerns about the company's exposure to residential mortgage-backed securities and collateralized debt obligations that it delved into during the heights of credit boom, and that it might incur further losses on these exposures.
S&P also affirmed its ratings on the company’s municipal bond insurance unit, National Public Finance Guarantee, at “A” (the sixth highest investment grade) with a developing outlook. In February 2009, after receiving the required regulatory approvals, the company established and capitalized the municipal bond insurance unit. This was done to separate its municipal bond insurance business from its riskier operations. Improving business acceptance could lead to a rating in the “AA”' category, alternatively, an ongoing lack of market acceptance and continued weak financial flexibility could result in a downgrade to the “BBB” category.
Its loss of a “AAA” rating since the second quarter of 2008 has resulted in a dramatic reduction in the company’s business activities. Moody’s (MCO) also rate MBIA Insurance Corporation at “B3” with a negative outlook, reflecting the risks associated with the ongoing litigation challenges related to the company’s recent restructuring efforts.
Peer Ambac Financial Group (ABK) has also been facing tough times since the onset of the subprime mortgage crisis. It has also seen multiple ratings downgrades since June 2008. At present, the long-term senior unsecured debt of Ambac is rated “CC” by S&P and “Ca” by Moody’s with a negative outlook. Ambac’s principal financial guarantee operating subsidiary, Ambac Assurance Corporation, has a “CC” financial strength rating from S&P, and a “Caa2” financial strength rating from Moody’s, with a developing outlook.
Read the full analyst report on MBI
Read the full analyst report on MCO
Read the full analyst report on ABK
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