Updated from Wednesday, Dec. 5.

Moody's Investors Service estimates that monoline insurer MBIA ( MBI) may be at a greater risk of facing a capital shortfall than its previous assessment, another blow to a key link in the chain of players backing an ever-shakier credit market.

Moody's more bearish view of the bond insurer was issued as part of a preliminary report sent out Wednesday to brief investors on the rating agency's progress as it conducts a more thorough review of other insurers, including Ambac Financial ( ABK), CIFG, Financial Guaranty Insurance Co. and SCA.

A Moody's spokeswoman said the agency declined to comment beyond the release. MBIA shares closed down 16% to $27.42 on Wednesday.

Monoline insurers, which use their high credit rating to provide insurance on debt issued by corporations and municipalities, have experienced capital concerns because many moved away from the staid business of enhancing the credit rating of insuring government bonds and corporate debt to insuring esoteric mortgage debt.

Moody's, as well as Fitch Ratings and Standard & Poor's, has been reviewing whether these companies are sufficiently capitalized to insure debt in the event of increasing defaults in a deteriorating housing market environment.

In its briefing, Moody's said that MBIA "is at greater risk of exhibiting a capital shortfall than previously communicated," adding that it "now considers this somewhat likely."

MBIA, which earlier this week celebrated its 20th anniversary of being a publicly traded company on the New York Stock Exchange, had been considered one of the stronger of the crop of monoline insurers that have been under balance sheet pressure.

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