This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

S&P Affirms MBIA, Ambac Ratings

Updated from 4:41 p.m. EST

Embattled financial guarantors MBIA (MBI - Get Report) and Ambac Financial (ABK) will retain their coveted triple-A rating -- at least for now, says Standard & Poor's.

On Monday, S&P issued a statement saying that Armonk, N.Y.-based MBIA is no longer on review for downgrade. Rival guarantor Ambac Financial's (ABK) triple-A ratings was reaffirmed by the agency. Both firms are being placed on negative watch, but downgrades at this point no longer appear imminent.

At the heart of the ratings agency's brightening forecast is the improving financial picture of both companies. MBIA, which raised some $2.5 billion from private equity firm Warburg Pincus and public investors, further enhanced its capital position after S&P's announcement on Monday by eliminating its quarterly dividend. The move will save some $174 million, the amount it paid in dividends in 2007. Ambac is expected to benefit from a plan that is presently being arranged by a consortium of lenders to provide fresh liquidity.

A rescue for Ambac by a bank group that includes Citigroup (C - Get Report) and UBS (UBS - Get Report) could provide it between $2 billion to $3 billion in a plan that would see it break itself into two halves, sources tell One would house policies for conservative debt, including municipal bonds; and another that backstops losses on structured debt, which are dropping in value due to the slumping mortgage market.

S&P's rating "reflects our assessment of the scope of Ambac's capital-raising plans and the company's ability to implement those plans," the agency's report reads. "We left the ratings on credit watch with negative implications to reflect uncertainty surrounding the risk profile and capitalization plans for the reported new corporate structure being contemplated by the holding company."

After S&P announced its action, MBIA said that it will eliminate its dividend. The company had cut its dividend to 13 cents last month, but has not yet paid out any dividends at that rate.

"MBIA will continue to take reasonable and prudent actions such as this dividend elimination in an effort to retain and strengthen our Triple-A ratings," said CEO Jay Brown, who returned to the company last week. "As a very large individual shareholder of MBIA, I'm the first one to feel the pinch from this action. But I think this, coupled with my recent commitment to buy a substantial number of additional shares, demonstrates my absolute commitment to be aligned with our owners and to maximize long-term value."

Calls to media representatives at Ambac, MBIA and S&P were not immediately returned.

The ratings moves come after months of handwringing over the fate of the imperiled bond insurers.

Monolines have been under pressure because rating agencies argue that the firms need billions more in capital to protect against losses in risky businesses that they began to provide guarantees on in the late 1990s and early 2000s.

MBIA, however, still faces a downgrade by Moody's Investors Service. That hit could be leveled as soon as this week, but S&P's affirmation could mean that Moody's follows suit.

High credit ratings are critical for bond insurers, which provide backstops and credit enhancements on securities from municipal bonds to funkier mortgage paper.

Although S&P appeared sufficiently content with MBIA's and Ambac's capital plans, the lack of action at another bond insurer, Financial Guaranty Insurance Co., led it to downgrade that firm to single-A from double-A. FGIC remains on watch for further action

S&P also reaffirmed the triple-A ratings of guarantor of CIFG Guaranty, CIFG Europe and CIFG Assurance North America Inc. But the agency downgraded guarantor XL Capital Assurance Inc. and XL Financial Assurance Ltd. to 'A-' from triple-A citing execution and timing risk on its plan to raise capital.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $34.98 0.00%
MBI $6.05 0.00%
UBS $14.27 0.00%
AAPL $93.70 0.00%
FB $101.91 0.00%


Chart of I:DJI
DOW 15,660.18 -254.56 -1.60%
S&P 500 1,829.08 -22.78 -1.23%
NASDAQ 4,266.8370 -16.7550 -0.39%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs