WASHINGTON, March 21 Moody's Investors Service
is reviewing the ratings of municipal bond insurer MBIA
Insurance Corp, its subsidiaries and its holding company MBIA
Inc, because of the company's "precarious financial
condition" and possible regulatory actions that could hurt its
credit, the rating agency said on Thursday.
National Public Finance Guarantee Corporation, a subsidiary,
is at risk after it extended a $1.7 billion secured loan to the
company, Moody's said.
"Should the loan become impaired, National's ability to pay
dividends to cash poor MBIA Inc may be further constrained and
its ability to write new business may be further delayed," said
The contraction in municipal insurance has been sharp and
swift. In 2005, more than half of new issues carried insurance.
Then, the financial crisis wrecked most of the industry.
Insurers, also known as monolines, had backed the subprime
mortgage debt that crumbled with the housing market and damaged
Moody's said that the likelihood the company will receive
large claims for commercial mortgage-backed securities and the
uncertainty about whether it will recover money from Bank of
America Inc related to those claims had inspired the
review of MBIA's Caa2 rating.
MBIA claims that Bank of America is responsible for the
writing of mortgages by Countrywide that were packaged into
bonds that MBIA had insured. MBIA was stuck with huge losses
when the loans went bad and now wants the bank to buy back the
A settlement is vital for MBIA. The company has said there
was significant risk that MBIA Insurance Corp will be put into
liquidation or rehabilitation by its New York regulator if it is
unable to settle its claims with the bank.
Another rating agency, Standard and Poor's, has already cut
its financial strength rating on MBIA Insurance Corp by three
notches to junk status, with a negative outlook.