Standard & Poor’s has downgraded five European securitisations backed by Financial Guaranty Insurance Co (FGIC), the world’s fourth-largest bond insurer.
The monoline insurer lost its “AAA” credit rating over concerns about the strength of its balance sheet.
The industry ran into trouble when bond insurers tried to boost earnings by expanding from municipal bonds into structured products, including mortgage bonds held in collateralised debt obligations (CDOs). The vehicles repackage pools of bonds, loans and credit default swaps and slice them into varying tranches of risk.
However, since rating agents began to scrutinise the effect of rising defaults on sub-prime mortgage securities guaranteed by the insurers, monoline insurers have tried to raise capital to fortify their balance sheets.
? Fitch Ratings downgraded Juturna (ELoC 16) – a CMBS loan granted to the BBC for the development of its broadcasting site in London – to rating watch negative, following a similar action on the monoline insurer MBIA, the guarantor behind Juturna.
