Rating downgrades possible for MBIA
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- September
- 19
MBIA Inc., the troubled Armonk-based bond insurer, faces possible downgrades of its financial strength rating by Moody’s Investors Service because of mounting worries about MBIA’s exposure to the weak housing market and troubled subprime mortgages.
The ratings review by Moody’s is the latest blow to hurt MBIA, whose stock has fallen 79 percent during the past year after the company reported record losses.
Moody’s added that the ratings downgrades also could affect Ambac Financial Group Inc., another major player in the bond insurance market.
Both companies have been hit hard by the weakest housing market since the early 1970s that has resulted in large numbers of homebuyers defaulting or falling behind on their mortgage payments.
Moody’s projected that there could be losses on 22 percent of the subprime first mortgages that lenders originated in 2006, up from earlier estimates of 14 percent to 18 percent.
“Because both Ambac and MBIA are meaningfully exposed to the risk of U.S. subprime mortgages and other residential mortgage products, the revised assumptions are expected to have a significant impact on the firms’ capital positions and multi-notch downgrades are possible,†Moody’s said in a written statement.
MBIA questioned the need for a downgrade and noted the company raised $2.6 billion of in new capital during the first quarter, giving it a capital cushion of more than $3 billion at current rating levels.
“The reality is we have worked for the past three months to minimize actual economic loss caused by changes in rating opinions and have plans in place to deal with any outcome of this review,†Jay Brown, MBIA chairman and chief executive officer, said in a written statement.
Shares of MBIA dropped 37 cents to $13.63 in trading today on the New York Stock Exchange.
This entry was posted
on Friday, September 19th, 2008 at 12:01 pm by Jay Loomis.
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