Tuesday, May 20, 2008 0 comments ++[ CLICK TO COMMENT ]++

CFIG Cut to Junk by Moody's

Moody's cut CFIG to junk and believes it doesn't have enough capital:

The bond insurance arm of CIFG Holding Ltd was slashed to junk status by Moody's Investors Service on Tuesday, due to concern about its capital position...

Moody's downgraded the insurance financial strength ratings of bond insurer CIFG Guaranty, CIFG Europe and CIFG Assurance North America, Inc to "Ba2," two levels below investment grade, from "A1," the fifth highest, and kept the ratings under review with uncertain direction.

The rating cuts "reflect the high likelihood that, absent material developments, the firm will fail minimum regulatory capital requirements," due to losses stemming from its debt and exposure to subprime mortgages, Moody's said.


CFIG is a small monoline insurer owned by Banque Federale des Banques Populaires and Caisse Nationale des Caisses d'Epargne. It was downgraded earlier this year to A1 (Moody's), AA- (Fitch) and A+ (S&P). I haven't followed CFIG closely but it looks like Moody's is saying that CFIG will fail regulatory capital requirements, which is quite serious.

The good news: less competition for Ambac... the bad news: Ambac or MBIA could be following the path of CFIG into oblivion if things get really bad (particularly if HELOC and CES deteriorates)...

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