20.11.2012 03:38
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MBIA Inc. -- Moody's downgrades MBIA Insurance Corporation to Caa2 and MBIA Inc. to Caa1

New York, November 19, 2012 -- Moody's Investors Service has downgraded to Caa2, from B3, the insurance financial strength rating of MBIA Insurance Corporation (MBIA Corp.) and to Caa1, from B2, the senior debt rating of MBIA Corp.'s parent company, MBIA Inc.The MBIA Corp. rating action concludes a review initiated in December 2011. The ratings outlooks for both companies are developing.

Today's rating actions have implications for various transactions wrapped by MBIA Insurance Corporation as discussed later in this press release.

RATING RATIONALE -- MBIA INSURANCE CORPORATION

Moody's stated that the downgrade of MBIA Corp. to Caa2, from B3, reflected a number of factors:

1) The insurer's weak liquidity position. At September 30, 2012, MBIA Corp. had approximately $386 million of liquid assets -- a modest amount relative to the insurer's contingent liabilities;

2) Ongoing deterioration of MBIA's commercial real estate portfolio that could lead to meaningful claims in the near future and threaten MBIA's already strained liquidity;

3) The likelihood that any potential global settlement with Bank of America over outstanding claims would be consummated at terms characteristic of a distressed exchange;

4) The likelihood of a claims payment deferral or other regulatory intervention at MBIA Corp. absent a settlement with Bank of America should significant claims materialize.

Last week, Bank of America Corporation announced that it had made a tender offer to purchase at par any and all of MBIA Inc.'s outstanding senior notes due 2034. The tender offer follows MBIA's announcement on 7 November that it would solicit consent from its senior noteholders to amend its debt indentures by substituting National Public Finance Guarantee Corporation for MBIA Corp. in the definitions of "Restricted Subsidiary" and "Principal Subsidiary." The proposed indenture amendments, if approved by more than 50% of the noteholders of each series of MBIA Inc. notes, would allow MBIA Inc. to avoid a default on its own debt if MBIA Corp. were placed into a rehabilitation or liquidation proceeding. BAC's tender offer on 13 November seeks to obtain ownership of at least 50% of one series of MBIA notes in order to block MBIA's consent solicitation.

The insurance financial strength rating of MBIA Mexico, S.A. de C.V. was also downgraded to Caa2 (national scale rating of Caa2.mx) with a developing outlook, given its reliance on the support from MBIA Corp.

The developing outlook of MBIA Corp. reflects the meaningful uncertainty faced by MBIA Corp. and the potential that a global settlement between MBIA and Bank of America could lead to either an improvement or deterioration in the credit profile of the insurer, depending on the specific terms.

Rating Drivers -- MBIA Insurance Corporation

Moody's cited the following factors that could lead to a rating upgrade for MBIA Insurance Corporation:

- A global settlement between Bank of America and MBIA that would leave MBIA Corp. solvent

- Substantial improvements in MBIA Corp.'s commercial real estate exposure that would limit its potential claims

- A meaningful capital infusion into MBIA Corp.

Moody's cited the following factors that could lead to a rating downgrade for MBIA Insurance Corporation:

- Inability to reach a global settlement with Bank of America that would leave MBIA corp. solvent

- Regulatory intervention that could reduce or disrupt payment of claims, such as a payment deferral plan or rehabilitation, that would cause significant loss severity to policyholders incommensurate with the current rating

Not affected by today's rating actions were MBIA UK Insurance Limited (insurance financial strength of B3, under review for downgrade) and National Public Finance Guarantee Corporation (MBIA National financial strength of Baa2, negative outlook).

RATING RATIONALE -- MBIA INC.

The rating agency commented that the downgrade of MBIA Inc.'s senior debt to Caa1 reflects:

1) The ongoing stress at MBIA Corp. and the risk of claims payment deferral or other regulatory action including potentially a rehabilitation or an insolvency proceeding, in the event that MBIA and Bank of America cannot reach a global settlement that would leave MBIA solvent;

2) The credit linkage between MBIA Inc. and its MBIA Corp. subsidiary given the cross default provision in MBIA Inc.'s senior debt indentures. A rehabilitation proceeding at MBIA Corp. is an event of default;

3) The limited liquidity at MBIA Inc. relative to potential debt repayments due under a possible cross default with MBIA Corp. At September 30, 2012, MBIA Inc. had $432 million of liquid assets and $897 million of senior notes outstanding;

4) Bank of America's recent tender offer on one class of MBIA Inc.'s senior bonds which, if successful, could prevent MBIA from completing a consent solicitation that would have removed the cross default provision between MBIA Corp. and MBIA Inc.

The developing outlook of MBIA Inc., similar to the outlook on MBIA Corp., reflects the divergent possibilities for its credit profile over the near-to-medium term.

Rating Drivers -- MBIA Inc.

Moody's cited the following factors that could lead to a rating upgrade for MBIA Inc.:

- A successful consent solicitation from MBIA that would further delink MBIA Inc. from its MBIA Corp. subsidiary

- A material strengthening of MBIA Inc.'s liquidity through dividends and/or potential capital raises

- A global settlement between MBIA and Bank of America that would leave MBIA Corp. solvent

Moody's cited the following factors that could lead to a rating downgrade for MBIA Inc.:

- Further deterioration at MBIA Corp. that increases the risks of an insolvency proceeding

- A successful tender offer by Bank of America that would keep the cross default provisions in debt indentures

- Further deterioration of MBIA Inc.'s liquidity

TREATMENT OF WRAPPED TRANSACTIONS

Moody's ratings on securities that are guaranteed or "wrapped" by a financial guarantor are generally maintained at a level equal to the higher of the following: a) the rating of the guarantor (if rated at the investment grade level); or b) the published underlying rating (and for structured securities, the outlined in Moody's special comment entitled "Assignment of Wrapped Ratings When Financial Guarantor Falls Below Investment Grade" (May 2008); and Moody's November 10, 2008 announcement entitled "Moody's Modifies Approach to Rating Structured Finance Securities Wrapped by Financial Guarantors".

In light of today's downgrade to Caa2 and developing outlook of MBIA Insurance Corp.'s rating, Moody's will adjust the rating of securities wrapped by MBIA Corp. based on the approach discussed above.

LIST OF RATING ACTIONS

The following ratings have been downgraded:

MBIA Inc. -- senior unsecured debt to Caa1 developing, from B2

MBIA Insurance Corporation: Insurance financial strength to Caa2 developing, from B3; surplus notes to C (hyb) from Caa3 (hyb) ; and preferred stock to C (hyb) from Ca (hyb)

MBIA Mexico S.A. de C.V. -- insurance financial strength to Caa2 developing, from B3; and national scale insurance financial strength to Caa2.mx developing, from B1.mx

The last rating action was on 19 December 19 2011 when Moody's downgraded MBIA Inc. to B2.

The principal methodology used in this rating was Moody's Rating Methodology for the Financial Guaranty Insurance Industry, published in September 2006. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

OVERVIEW OF MBIA

MBIA Inc. (NYSE: MBI) provides financial guarantees to issuers in the municipal and structured finance markets in the United States, as well as internationally. MBIA also offers various complementary services, such as investment management and municipal investment contracts.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

NOTE: Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Implementation Guidance published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Helen Remeza Vice President - Senior Analyst Financial Institutions Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Stanislas Rouyer Associate Managing Director Financial Institutions Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.

Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.

This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.

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