Bankruptcy

Further Update on Bond Insurers

By J. Michael McBride

We have previously noted the precipitous decline in the value of MBIA and Ambac, the companies which insure certain types of securities. Once again, the market had already given its opinion of the value of the companies by pushing their stocks into the basement before the ratings companies officially downgraded their credit. The other interesting thing to watch is the overall market impact which these downgrades have on the general market. One would assume that the buyers of the insured products must adjust the value of their portfolio every time the quality of the insurance backing that product falls. However, I have not read where this is being done, at least broadly.

Quote:

MBIA and Ambac have lost their triple-A credit ratings this year as guarantees they sold on mortgage-backed securities and more complex mortgage-related securities called collateralized debt obligations, or CDOs, soured. Without top ratings, bond insurers struggle to sell new policies.

Here is a link to the latest article on these insurers and their proposals to try and adjust their business models to adapt to the current conditions.
http://www.marketwatch.com/news/story/mbia-ambac-fall-concern-about/story.aspx?guid=%7B1EB8C327-B201-4585-B24D-F50A95F45EF8%7D

Michael

Full post as published by Texas Lawyer Blog on August 06, 2008 (boomark / email).