Standard & Poor's Tuesday night dropped its long-term counterparty credit ratings on Financial Security Assurance Holdings Ltd. - intermediate owner of bond insurer Financial Security Assurance Inc. - to AA-minus with a stable outlook from AA following a similar downgrade of parent Dexia SA.

FSA Inc.'s insurer financial strength rating remains AAA with a negative outlook.

"As Dexia SA owns 99.7% of FSA Holdings, we view the credit quality of this bond insurance holding company as essentially equal to that of Dexia," Standard & Poor's credit analyst Robert Green said in a statement.

Three European governments and existing shareholders agreed to prop up Dexia earlier this week with a capital injection of nearly $9.2 billion. It has suffered from exposure to the U.S. housing market through FSA.

FSA said in August it would exit the asset-backed securities business to focus on public finance.

Also on Tuesday, Depfa Bank PLC had its ratings downgraded by both Fitch Ratings and Moody's Investors Services, following news that a consortium of German financial institutions were offering a $50 billion funding facility to rescue Depfa's parent, Hypo Real Estate Holding AG.

Fitch downgraded the long-term issuer default rating for Depfa to A-minus from AA-minus to move in line with its rating on Hypo. Moody's downgraded the senior unsecured debt and deposit rankings to A2 from Aa2 and the bank financial strength ratings to D-plus from C-plus.

"While Depfa's higher IDR and individual ratings previously reflected its stand-alone strength and separate funding, Fitch now believes that a distinction between the long-term IDRs of the various group entities is no longer justified," the agency said in a statement. "Although the current market constraints with regard to rolling over short-term wholesale funding hit Depfa first, it has become a concern for the whole group."

Standard & Poor's had Monday downgraded Depfa's long-term counterparty rating to BBB-plus from A prior to announcement of the final plan for support. It said the rating action would not impact the ratings of three prepaid gas deals in which Depfa provided a guaranteed investment contract.

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