Interest Rate Roundup

Friday, February 01, 2008

The bond insurer ratings saga continues ... oh wait, I already used that headline

This time, it's Moody's that is weighing in with the threat of downgrades ...

From Bloomberg:

Moody's Investors Service may downgrade some bond insurers in the next few weeks as it reassesses the extent of losses from subprime mortgage securities.

The industry review will be completed by late February and ratings may be cut on some companies earlier if they can't raise capital, New York-based Moody's said in a report designed to answer "frequently asked questions'' by investors.

"Our estimate of capital needed to support the mortgage- related risk of some guarantors has risen significantly,'' Moody's analysts led by Stanislas Rouyer said in a report dated yesterday.

MBIA Inc. and Ambac Financial Group Inc., the world's largest bond insurers, reported a combined loss of $5.5 billion in the fourth quarter after a slump in the value of their guarantees on subprime-mortgage securities. Moody's said it may cut each of the companies' AAA bond insurer credit ratings.

"In order to retain their Aaa ratings, financial guarantors need an adequate level of capital, a risk management and underwriting framework commensurate with that capital, and a viable business plan,'' Moody's said. "If one of these characteristics is judged by Moody's to be inadequate, we would expect to lower the rating.''

Meanwhile, CNBC reports that the bailout brigade is trying to ride to the rescue of the bond insurance industry.


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