Fitch Downgrades MBIA

The ratings agency said the financial guarantor's claims-paying resources didn't warrant a Triple-A rating; MBIA disputes the claim.
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Updated from 3:37 p.m. EDT

Fitch Ratings on Friday cut

MBIA's

(MBI) - Get Report

pristine credit rating, dealing the financial guarantor an unexpected blow after a mad dash to raise its capital reserves earlier this year.

The ratings agency downgraded the insurer financial strength ratings on MBIA Insurance Corp. and its subsidiaries to AA from AAA and the long-term rating of MBIA Inc., the parent holding company of MBIA, to A from AA. Fitch assigned MBIA a negative rating outlook. The downgrade impairs MBIA's ability to win new business, as it relies on a Triple-A rating to backstop public and corporate debt.

"Fitch believes MBIA's pro-forma claims paying resources at year-end 2007 of $16 billion now fall below Fitch's AAA capital targets by a range of $3.4

billion to $3.8 billion, but are consistent with Fitch's updated standards for AA capital," Fitch said in a statement announcing the ratings action. "These figures fully consider the $2.6 billion of capital already raised by MBIA earlier this year."

MBIA's largest rival,

Ambac Financial

(ABK)

, and other smaller guarantors were hit earlier by downgrades, as ratings agencies fretted about their ability to pay claims as the packaged debt the firms insure plummeted in value.

The guarantor, which last month

asked Fitch to cease

rating its financial strength, immediately responded with a press release in which it said it "respectfully disagree

d" with the agency's decision.

"MBIA has a balance sheet that is among the strongest in the industry with over $17 billion in claims-paying resources, and has a high quality insured portfolio, factors which we believe enable MBIA to meet severe economic stress scenarios," CFO Edward Chaplin said in a company statement.

The firm in March told

TheStreet.com

it hoped to

pick up market share

from its competitors after raising $2.6 billion in capital from public and private sources and seeing its ratings affirmed by Moody's Investors Service and Standard & Poor's.

On just Thursday, MBIA issued a press release touting its guarantee of $373 million of a $3.0 billion bond issued by the North Texas Tollway Authority. The guarantor characterized the deal as an "indication of MBIA's enduring commitment to infrastructure finance at the state and local government level."

Shares of MBIA closed down 4.8% to $13.61 Friday.

This article was written by a staff member of TheStreet.com.