Moody's cuts FGIC ratings to one level above junk

NEW YORK, March 31 (Reuters) - Moody's Investors Service on Monday cut its ratings on FGIC Corp units and its bond insurance arm to one level about junk status, citing the company's inability to raise new capital.

FGIC units and its Financial Guaranty Insurance Co. arm ratings were cut to "Baa3," or one level above junk, from "A3," the seventh highest rating. Moody's also said the ratings remain on review for further cuts.

In addition to PMI Group, FGIC is owned by private equity firms Blackstone Group (BX.N), Cypress Group and CIVC Partners LP.

"These rating actions reflect the company's inability to date to raise new capital, the increased likelihood of FGIC breaching minimum regulatory capital requirements, and the effects of its current inability to upstream dividends without prior regulatory approval," Moody's said in a statement.

Standard & Poor's on Friday cut its ratings on FGIC Corp and its bond insurance arm to junk status, saying the insurer has failed to come up with a plan to remain viable and write new business.

S&P cut FGIC Corp by six notches to "B," five steps below investment-grade, from "BBB." It downgraded FGIC's insurance arm, Financial Guaranty Insurance Co, by six notches to "BB," two steps below investment grade, from "A."

The outlook is negative, indicating another rating downgrade is likely over the next two years.

Fitch Ratings on Wednesday cut FGIC Corp to junk at "BB" from "A" and cut Financial Guaranty Insurance Co to "BBB," the second-lowest investment grade, from "AA."

FGIC last week said it had violated New York state insurance department risk limits, as noted in financial statements the company released on March 26, which may further hamper capital-raising efforts. (Reporting by Walden Siew; Editing by Dan Grebler)