Risky Paper Hammers MBIA

MBIA's exposure announcement comes on the heels of several ratings agencies' reviews of guarantors' capital adequacy levels as the credit crunch wears away at their ratings. In addition to cutting ACA's rating Wednesday, S&P affirmed MBIA's key triple-A rating, but revised the company's outlook to negative from stable. S&P's ratings action followed on the heels of others' similar reviews. Moody's Investors Service last Friday also affirmed MBIA's credit rating as triple-A, but also revised its outlook to negative from stable.

The agencies were less than sanguine about the outlook for these firms, and emphasized the importance of raising capital to defend their ratings. Of affected companies, S&P writes Wednesday, "their capital resources may no longer be sufficient at their respective rating levels."

"We will be focusing on both the effectiveness of the companies' capital remediation plans and their risk management strategies going forward," writes Moody's in its release Friday.

Shares of MBIA recently were down 26.4% to $19.90, while shares of Ambac had slipped 2.4% to $26.80.

Following S&P's ratings action Wednesday, MBIA's CEO Gary Dunton said he was "pleased S&P affirmed the company's triple-A ratings as we continue to make progress towards the implementation of a capital management plan during the first quarter of 2008," according to a press release. "We are confident that we will successfully manage through this challenging period, while growing the business profitably, and return to Stable Outlook."

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