MBIA and Ambac Could Still Lose Triple-A Ratings

Posted by Patrick O'Connor on 5/13/08 2:12 pm

After raising billions of dollars a few months ago to avoid losing the highest ratings from the likes of Moody’s and Standard & Poors, MBIA and Ambac could still be in trouble.

Substantially higher than expected losses on home-equity loans and collateralized debt obligations at MBIA and Ambac reignited concerns today that both bond insurers could lose their highly coveted triple-A ratings.

Moody’s analyst Jack Dorer said the higher losses may “have material implications for the estimated capital adequacy of financial guarantors most exposed to this risk.”

Moody’s has not yet put MBIA or Ambac on formal review, but some are wondering if such a move is inevitable.  If either bond insurer loses its triple-A rating, there could be a domino effect of ratings downgrades throughout the country.  Stay tuned.

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