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Bond Insurer Breakup
by Portfolio Staff
Feb 15 2008
Feb 15 2008
F.G.I.C. plans to split after call by New York authorities.
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Summary:
A holding company whose subsidiaries provide financial guarantee products and other financial services to clients in both … View More
Last Trade:Change:
Summary:
The Company is a provider of financial guarantee products and specialized financial services that meet the credit enhancement, … View More
New York authorities said Thursday that time was running out for the bond insurers, and now one is taking radical action.
Financial Guaranty Insurance, the third-biggest bond insurer after
MBIA and Ambac Financial, says it will become two companies. The split would leave one company insuring municipal bonds and the other with a troubled structured-finance portfolio.
"As of this morning, we received a notification from F.G.I.C. that they have sought an application to have their business actually split into two," Eric Dinallo, New York State's insurance commissioner, said on CNBC this morning.
On Thursday, Dinallo and Governor Eliot Spitzer of New York told a House Financial Services subcommittee hearing that the state might break up bond insurers to help them avoid downgrades in their credit ratings.
Without help, bond insurers could lose their triple-A credit ratings, which are needed to guarantee $2.4 trillion of municipal and mortgage-based debt, including funding for public projects like schools and roads.
F.G.I.C. has already suffered the loss of its triple-A rating. On Thursday, Moody's Investors Service cut its rating on the insurer by six notches, to A3, citing its "meaningfully weakened capitalization and business profile resulting, in part, from its exposures to the U.S. residential mortgage market."
In contrast, Moody's said, "MBIA and Ambac are better positioned from a capitalization and business franchise perspective."
Financial Guaranty Insurance, the third-biggest bond insurer after
MBIA and Ambac Financial, says it will become two companies. The split would leave one company insuring municipal bonds and the other with a troubled structured-finance portfolio."As of this morning, we received a notification from F.G.I.C. that they have sought an application to have their business actually split into two," Eric Dinallo, New York State's insurance commissioner, said on CNBC this morning.
On Thursday, Dinallo and Governor Eliot Spitzer of New York told a House Financial Services subcommittee hearing that the state might break up bond insurers to help them avoid downgrades in their credit ratings.
Without help, bond insurers could lose their triple-A credit ratings, which are needed to guarantee $2.4 trillion of municipal and mortgage-based debt, including funding for public projects like schools and roads.
F.G.I.C. has already suffered the loss of its triple-A rating. On Thursday, Moody's Investors Service cut its rating on the insurer by six notches, to A3, citing its "meaningfully weakened capitalization and business profile resulting, in part, from its exposures to the U.S. residential mortgage market."
In contrast, Moody's said, "MBIA and Ambac are better positioned from a capitalization and business franchise perspective."
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