Fitch Places MBIA's 'AAA' IFS Rating on Watch Negative
Last update: 2/5/2008 3:50:01 PM
NEW YORK, Feb 05, 2008 (BUSINESS WIRE) -- Fitch Ratings has placed the following ratings of MBIA Inc. (MBIA Inc.) and its financial guaranty subsidiaries on Rating Watch Negative:
MBIA Inc.
--Long-Term rating 'AA'
--$75 million of 7.00% senior unsecured debentures due Dec. 15, 2025 'AA'
--$100 million of 7.17% senior unsecured debentures due July 15, 2027 'AA'
--$150 million of 6.63% senior unsecured debentures due Oct.1, 2028 'AA'
--$200 million of 6.40% senior unsecured debt due Aug. 15, 2022 'AA'
--$175 million of 4.50% Senior unsecured notes due July 15, 2010 'AA'
--$100 million of 9.38% senior unsecured notes due Feb.15, 2011 'AA'
--$350 million of 5.70% senior unsecured notes due Dec. 1, 2034 'AA'
--MBIA Insurance Corp.
--MBIA Insurance Corp. of Illinois
--MBIA UK Insurance Limited
--MBIA Assurance SA
--MBIA Mexico SA de CV
--Capital Markets Assurance Corp.
MBIA Insurance Corp.
--Subordinated debt rating 'AA'
--$1 billion of 14.00% surplus notes due Jan. 15, 2033 'AA'
Insurer Financial Strength (IFS) 'AAA'
Fitch has also affirmed the following rating with a Stable Outlook:
MBIA Mexico SA de CV
--National IFS at 'AAA(mex)'
This action on MBIA Insurance Corp. (MBIA) follows Fitch's announcement today that it will be updating certain modeling assumptions in its ongoing analysis of the financial guaranty industry (see separate press release titled 'Fitch Announces Next Phase of Capital Analysis of Financial Guarantors' available at ). Fitch believes it is possible that modeled losses for structured finance collateralized debt obligations (SF CDOs) could increase materially as a result of these updated projections. The need to update loss assumptions at this time reflects the highly dynamic nature of the real estate markets in the U.S., and the speed with which adverse information on underlying mortgage performance is becoming available.
Fitch expects that both simulated capital model losses and expected losses will increase materially for MBIA because of the company's significant SF CDO exposure within its insured portfolio, which was $30.6 billion of net par outstanding as of Sept. 30, 2007. Fitch believes that a sharp increase in expected losses would be especially problematic for the ratings of financial guarantors exposed to this asset class, including MBIA -- even more problematic than previously discussed increases in 'AAA' capital guidelines, which has been the primary focus of recent analysis of the industry. Expected losses reflect an estimate of future claims that Fitch believes would ultimately need to be paid by a guarantor. A material increase in claim payments would be inconsistent with 'AAA' ratings standards for financial guarantors, and could potentially call into question the appropriateness of 'AAA' ratings for those affected companies, regardless of their ultimate capital.
MBIA has already raised $1.5 billion of new capital through surplus notes and a direct equity investment from Warburg Pincus, with an additional $500 million equity investment through a rights offering backstopped by Warburg Pincus to close by the end of the first quarter of 2008. Fitch currently believes that these additions to capital may not be sufficient to address the necessary capital needed to maintain MBIA's 'AAA' IFS rating. Fitch will update the Rating Watch Negative status on MBIA and its competitors as its conclusions are reached.
MBIA Inc. is a U.S. holding company whose primary operating subsidiary, MBIA Insurance Corp. and MBIA UK Insurance Limited, provide financial guaranty insurance and other forms of credit enhancement throughout the U.S. and internationally. For Sept. 30, 2007, MBIA Inc. reported consolidated assets under Generally Accepted Accounting Principles of $45.3 billion and shareholders' equity of approximately $6.5 billion. On an aggregated basis, net par outstanding for MBIA totaled $673 billion as of Sept. 30, 2007.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, . Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
SOURCE: Fitch Ratings
Fitch Ratings, New YorkJoo-Yung Lee, 212-908-0560Thomas J. Abruzzo, 212-908-0793Kenneth Reed, 212-908-0540 (Media Relations)
Copyright Business Wire 2008 |
