As a result of its downgrade of Assured Guaranty late last week, Moody’s Investors Service has downgraded 225 structured finance securities guaranteed by the bond insurer.
Impacted securities include residential mortgage-backed securities, asset-backed securities, structured notes, debt issuance of certified capital companies, and trust preferred collateralized debt obligations.
“The action is driven solely by the rating action on AGC and AGM and is not a result of change in key assumptions, expected losses, cash flows and stress scenarios on the underlying assets,” the report said.
Moody’s downgraded the ratings of Assured Guaranty Municipal Corp. to A2 from Aa3, Assured Guaranty Corp. to A3 from Aa3, and Assured Guaranty Re Ltd. to Baa1 from A1.
The downgrade was based on a downward reassessment of Assured’s business franchise, expected future profitability, and financial flexibility.
The downgraded structured finance securities will either have the downgraded rating of its bond insurer, or its underlying rating.
“Moody’s ratings on structured finance 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higher of the following: a) the rating of the guarantor (if rated at the investment grade level) or b) the published or unpublished underlying rating,” the report said.
Some of the securities that were downgraded include those issued by Prudential Home Mortgage Company, First Alliance Mortgage Loan Trust, CS First Boston Mortgage Securities Corp, Higher Education Student Assistance Authority of the State of New Jersey, and Massachusetts Educational Financing Authority.