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Moody's Downgrades FGIC, Offers Negative Outlook
Restructuring plan likely to result in the company retaining the higher-risk portion of the insured portfolio without the premiums associated with its lower-risk business.
June 23, 2008
Moody's Investors Service last Friday downgraded the insurance financial strength ratings of the main operating subsidiaries of FGIC Corp. to B1 from Baa3.
Moody's also downgraded the senior debt ratings of FGIC to Caa2 from B3 and the contingent capital securities ratings of Grand Central Capital Trusts I-IV to B3 from B2.
The rating action concludes a review for possible downgrade initiated on March 31, and reflects the company's severely impaired financial flexibility and the company's proximity to minimum regulatory capital requirements relative to the rating agency's estimations of expected case losses.
The rating action also considers the likelihood that FGIC's previously announced restructuring plan will ultimately result in the company retaining the higher-risk portion of the insured portfolio without the premiums associated with its lower-risk business.
The outlook for the rating is negative, says Moody's.
FGIC Corp is a holding company whose primary operating subsidiaries, Financial Guaranty Insurance Corporation and FGIC UK Limited, provide credit enhancement and protection products to the public finance and structured finance markets. FGIC Corp. is privately owned by an investor group consisting of The PMI Group, GE and private equity firms Blackstone, Cypress and CIVC. For the three months ended March 31, FGIC Corp reported GAAP losses of $33.3 million.
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