Interest Rate Roundup

Thursday, January 31, 2008

The bond insurer ratings saga continues ...

From S&P this afternoon:

"Standard & Poor's Ratings Services today lowered its financial strength, financial enhancement, and issuer credit ratings on Financial Guaranty Insurance Co. to 'AA' from 'AAA' and its senior unsecured and issuer credit ratings on FGIC Corp. to 'A' from 'AA.' Standard & Poor's also placed all the above ratings on CreditWatch with developing implications.

At the same time, Standard & Poor's placed various ratings on MBIA Insurance Corp., XL Capital Assurance Inc., XL Financial Assurance Ltd., and their related entities on CreditWatch with negative implications.

The ratings on various related contingent capital facilities were also affected.

These ratings actions, including the affirmations, take into account the ratings actions announced yesterday by our Structured Finance group concerning RMBS and CDO downgrades and credit watch actions.

The rating actions are the result of our most recent review of all the bond insurance companies' capital plans. Our review covered the scope of each plan relative to the projected losses for that company, the success each company has had to date in implementing its plan, and our assessment of the likelihood that the companies could implement the remaining components of their plans. This review is part of Standard & Poor's ongoing assessment of the potential subprime-related losses that these bond insurers might incur and how they are managing their capital positions to handle the losses. Further reviews will occur as circumstances warrant."

Marketwatch has a blurb on this as well. Of course, it should be pointed out that MBIA defended its position during a 4-hour long conference call today.


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