Largest Bond Insurers May Give Up on Retaining Moody’s Top Rating
After Moody's Investors Service put the world's largest bond insurers under review for a second time this year, MBIA Inc. and Ambac Financial Group Inc. may give up attempts to retain the Aaa credit ratings of their bond insurance units.
The companies, which have raised $4.1 billion combined in the past six months, said they won't seek more capital after New York-based Moody's yesterday said the most likely result of its examination would be a downgrade of the companies' top insurance financial strength rankings.
"You can't go to somebody to raise capital if you don't know what the rules for capital raising would be,'' MBIA Chief Executive Officer Jay Brown told reporters yesterday. "Goal posts move, targets change.''
Brown and Ambac interim CEO Michael Callen were hired this year largely to fulfill one key mission: save the bond insurers' Aaa credit ratings. More than $1 trillion of municipal bonds and corporate securities the companies guaranteed depend on those top ratings, as does the capacity for New York-based Ambac and Armonk, New York-based MBIA to generate enough new business.
"The ability of MBIA and Ambac to continue as viable ongoing companies is highly in doubt,'' according to a note from Rob Haines and Craig Guttenplan, analysts at debt research firm CreditSights Inc. in New York.
"How can a triple A be justified for a company that cannot sell its product, is facing mounting losses and has no access to the capital markets?''
Moody's put Ambac and MBIA under review in January, only to affirm MBIA a month later and Ambac in March. The credit rating company cited ``meaningful uncertainty'' about Ambac's ability to regain market share since the first reviews, and ``diminished new business prospects'' for MBIA in yesterday's announcement.
Published on June 5, 2008
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