Fitch mulls MBIA downgrade [View All]

[RedEarth]

Source: (AP

NEW YORK (AP) - Fitch Ratings is considering slashing its rating on MBIA Inc. (NYSE:MBE) (NYSE:MBI) , the ratings agency said Tuesday, posing the latest threat to the beleaguered bond insurance industry and the trillions of dollars in debt it protects.

Fitch placed the Armonk, N.Y.-based insurer's vital 'AAA' financial-strength rating under review for a possible downgrade. Top-notch ratings are crucial for bond insurers, which write policies promising to repay bondholders when bond issuers default, to continue winning new business.

Ratings downgrades and the prospect for more have rocked the bond insurance industry and the broader financial markets in the past few months. Fitch has downgraded Ambac Financial Group Inc. (NYSE:AKT) (NYSE:AKF) (NYSE:AFK) (NYSE:ABK) and Security Capital Assurance (NYSE:SCA) Inc., while Fitch and Standard & Poor's (NYSE:MHP) have downgraded Financial Guaranty Insurance Co.

MBIA, Ambac, FGIC and SCA collectively insure $1.7 trillion in debt, mostly bonds issued by the government.

Fitch said it is reconsidering how much MBIA might lose on some of the more complex and risky deals the company insures. Of MBIA's $673 billion in insured debt, about $30.6 billion is 'structured finance collateralized-debt obligations,' which are investments splicing payments from a number of different sources including bonds secured by home loans.



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