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Moody's sees capital risk at MBIA

December 06, 2007|From Times Wire Services

A capital shortfall at MBIA Inc. is "somewhat likely," Moody's Investors Service warned Wednesday, sending the bond insurer's already-pummeled shares down 16%.

A review of MBIA's residential mortgage-backed portfolio showed that the company was at greater risk of falling short of the capital needed for a top AAA rating than earlier believed, Moody's said in a statement.

MBIA shares tumbled $5.21 to $27.42 on the news. The stock of rival bond insurer Ambac Financial Group Inc. shed $2.30, or 8.9%, to close at $23.52.

Moody's and rival debt ratings firms Standard & Poor's and Fitch have been reviewing bond insurers to assess the effect of the sub-prime mortgage crisis on them and their exposure to structured securities containing the risky mortgages. Moody's said it expected to complete its review within two weeks.

An MBIA spokesman couldn't be reached for comment.

Reiterating a previous finding, Moody's said it believed that Financial Guaranty Insurance Co., Security Capital Assurance and Ambac were also "somewhat likely" to have a capital shortfall.

Moody's also reiterated that of the five large bond insurers it was reviewing, CIFG, owned by French bank Natixis, was most likely to fall below the capital benchmarks for a AAA rating. However, CIFG has announced a plan to enhance its capital that would significantly reduce that risk, Moody's said.

The loss of AAA ratings on bond insurers could trigger downgrades of the securities they insure, affecting all kinds of investments, including municipal bonds and complex structured securities.

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