June 5 (Bloomberg) -- MBIA Inc. and Ambac Financial Group
Inc., the world's largest bond insurers, had their AAA financial
strength rankings cut by Standard & Poor's, taking with them the
ratings on more than $1 trillion of securities they guaranteed.
The ratings were lowered two levels to AA, New York-based
S&P said in a statement today. S&P said it would keep the ratings
under review pending ``clarification of ultimate potential losses
as well as future business prospects, the outcome of strategic
business decisions, and potential regulatory developments.''
Ambac said it's disappointed by S&P's decision. ``Our
frustration stems, in part, from the ever-changing criteria for
AAA financial strength ratings,'' Ambac said in a statement.
Ambac, which pioneered municipal bond insurance in 1971, and
MBIA, which followed three years later, are succumbing to a loss
of confidence after straying into backing securities linked to
subprime mortgages and home-equity loans that are now defaulting
at record rates. The companies, which have raised $4.1 billion
combined in the past six months to cover potential losses, said
yesterday they were unlikely to meet demands for more capital.
``The rating agencies have been plain that capital ratios
are a moving target, and with economic and spread conditions
getting worse, these downgrades shouldn't be a surprise,'' said
Matt Fabian, a managing director at Concord, Massachusetts-based
researcher Municipal Market Advisors. ``It's the end of an era.''
The downgrades affect most of the $668 billion of debt
insured by MBIA and the $551 billion of debt guaranteed by Ambac
at the end of March. Unless the debt had an underlying rating of
AAA without insurance its ranking was also lowered, according to
Mimi Barker, a spokeswoman, for S&P
Read More: Bloomberg
Last update : 01-08-2008 18:12
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