NEW YORK (Reuters) - MBIA Inc (MBI.N), the world’s largest bond insurer, on Friday said it asked Fitch Ratings to withdraw its insurer financial strength ratings for six units, including its main bond insurance unit, MBIA Insurance Corp.
Fitch is the only one of the three major U.S. credit rating agencies that was still reviewing MBIA’s critical “triple-A” ratings for a possible downgrade. It has also been faster than larger rivals Moody’s Investors Service and Standard & Poor’s to downgrade other bond insurers’ credit ratings.
MBIA spokesman Willard Hill said Fitch’s rating practices were “not at all” a factor in the withdrawal request. Armonk, New York-based MBIA did ask Fitch to continue rating more than $1.1 billion of unsecured debt issued by the company.
A call to Fitch was not immediately returned.
Losing triple-A ratings would make it harder for MBIA to win business, and could further roil credit markets by forcing investors who demand those ratings to sell municipal bonds.
MBIA raised some $2.6 billion of capital to help preserve its triple-A ratings, after losses mounted from its guarantees of securities tied to subprime mortgages. Its efforts convinced Moody’s and S&P to remove their threats of a downgrade, though they still have a “negative” outlook for MBIA ratings.
Joseph “Jay” Brown, MBIA’s new chief executive, said last month he plans within five years to split the company’s municipal and structured finance operations.
Hill said: “We don’t believe that Fitch’s capital allocation model supports our goal of transforming the business into discrete operating entities for public finance and structured finance.”
The MBIA spokesman added that Fitch has since 2005 tripled its fee to provide insurer financial strength ratings, and that Moody’s and S&P both rate more of MBIA’s insured transactions and do fundamental credit analysis on those transactions.
“We believe that an investor’s decision to buy, sell or own a credit-enhanced instrument is a function of the underlying rating and our insurer financial strength rating,” Hill said.
Reporting by Jonathan Stempel; editing by Leslie Gevirtz, Gary Hill