Late today, Fitch Ratings put
Security Capital Assurance on "rating watch negative." Fitch said the company's capital is more than $2 billion short of what's required to maintain a AAA rating. Fitch said Security Capital has four to six weeks to obtain commitments that would bolster its capital position, or it will cut the firm's
rating two notches to AA. The problems stem from SCA's
exposure to CDOs
(Residential Mortgage Backed Securities), including second-lien loans.
Why does this matter? Like MBIA
is a bond insurance firm. If it loses its AAA rating, the impact on future business could be significant, to say nothing of the ratings on bonds that SCA
Here is SCA's comment
on the matter. If you'll recall, MBIA
a deal designed to bolster its capital position.