FGIC’s Bond Unit Loses its Top Rating from Fitch
On Wednesday, FGIC Corp's (Financial Guaranty Insurance Co) bond insurance arm lost its top "AAA" rating from Fitch Ratings, which could also cause downgrades to more than 100,000 municipal bonds.
Fitch cut FGIC's "AAA" insurer financial strength rating by two notches to "AA," saying the insurer does not have the capital required for a top rating. It also cut parent company FGIC Corp's long-term rating by three notches to "A" from "AA," the third-highest investment grade.
The ratings may be cut again because of uncertainty about the company's business model, losses and capital strategy, Fitch said in a statement.
FGIC is owned by a group including mortgage insurer PMI Group Inc and private equity firms Blackstone Group Cypress Group and CIVC Partners LP. FGIC is the fourth-largest bond insurer, with about $314.8 billion of outstanding bonds insured as of the end of September, most of it municipal bonds. The total also included about $31 billion of mortgage-backed securities and $28 billion of collateralized debt obligations.
Published on January 31, 2008
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