Fitch May Downgrade Bond Insurer SCA
Fitch Ratings announced on Wednesday that it has placed the top-tier ratings of bond insurer Security Capital Assurance and its financial guaranty insurance units on review for a possible ratings downgrade.
The Bermuda-based bond insurer, which holds top "AAA" ratings, has exposure to structured finance collateralized debt obligations that are now rated junk due to their link to deteriorating subprime mortgages, Fitch said.
SCA's capital adequacy currently falls below guidelines for an 'AAA' rating by more than $2 billion, due to sharp downgrades by Fitch in a number of SCA's insured CDOs, Fitch said in a statement.
SCA, which provides financial guaranty insurance and other credit products to public finance markets, has four to six weeks to obtain "firm capital commitments" to meet capital guidelines that may result in a more favorable view by Fitch, the rating company said.
"If SCA is unable to meet capital guidelines in the noted timeframe, Fitch would expect to downgrade SCA's ratings" by two notches to "AA," or the third highest rating, Fitch said, sending SCA stocks down about 22 percent on Wednesday.
Fitch Ratings last month said it may cut ratings of bond insurance companies, noting that companies such as SCA and also Ambac Financial Group had a "moderate" probability of potential cuts. Fitch last month noted that CIFG Guaranty and Financial Guaranty Insurance Co. had a "high" probability.
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Published on December 13, 2007
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