CHICAGO, June 5 (Reuters) - Standard & Poor's Ratings Services on Friday downgraded the rating for National Public Finance Guaranty Corp, a unit of MBIA Inc, to A from AA-minus.
The rating agency also dropped MBIA Insurance Corp's rating to BBB from BBB-plus with a negative outlook.
'The downgrade of National reflects our view of both its uncertain business and capital-raising prospects,' said S&P credit analyst David Veno in a statement. 'The company's capital adequacy is marginally below our AA standard.'
S&P said the outlook on National was developing.
MBIA announced earlier this year it was separating its municipal bond operations into a new unit -- an action that led several major banks to sue alleging MBIA acted illegally with the business spin off.
S&P said National's rating could rise if there is a favorable resolution of the litigation, 'which in turn could facilitate capital-raising efforts and lead to more tangible separation of National from MBIA and MBIA Inc.'
But it warned that ongoing lack of market acceptance and weak financial flexibility could push the rating into the 'BBB' category.
Tom McLoughlin, National's chief executive officer said the insurer remained committed to the public finance market, was vigorously fighting the litigation and planned to raise additional capital 'as soon as circumstances reasonably allow.'
'We regard today's rating action as a temporary setback,' he said in a statement.
As for the MBIA Insurance downgrade, Veno said the negative outlook reflects the view that adverse loss development on the structured finance book could continue.'
(Reporting by Karen Pierog; Editing by Diane Craft) Keywords: MBIA RATING/ (karen.pierog@thomsonreuters.com; 1 312 408 8647; Reuters Messaging: karen.pierog.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The rating agency also dropped MBIA Insurance Corp's rating to BBB from BBB-plus with a negative outlook.
'The downgrade of National reflects our view of both its uncertain business and capital-raising prospects,' said S&P credit analyst David Veno in a statement. 'The company's capital adequacy is marginally below our AA standard.'
S&P said the outlook on National was developing.
MBIA announced earlier this year it was separating its municipal bond operations into a new unit -- an action that led several major banks to sue alleging MBIA acted illegally with the business spin off.
S&P said National's rating could rise if there is a favorable resolution of the litigation, 'which in turn could facilitate capital-raising efforts and lead to more tangible separation of National from MBIA and MBIA Inc.'
But it warned that ongoing lack of market acceptance and weak financial flexibility could push the rating into the 'BBB' category.
Tom McLoughlin, National's chief executive officer said the insurer remained committed to the public finance market, was vigorously fighting the litigation and planned to raise additional capital 'as soon as circumstances reasonably allow.'
'We regard today's rating action as a temporary setback,' he said in a statement.
As for the MBIA Insurance downgrade, Veno said the negative outlook reflects the view that adverse loss development on the structured finance book could continue.'
(Reporting by Karen Pierog; Editing by Diane Craft) Keywords: MBIA RATING/ (karen.pierog@thomsonreuters.com; 1 312 408 8647; Reuters Messaging: karen.pierog.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.