Standard & Poor's yesterday downgraded bond insurer Syncora Guarantee Inc. to CC from B, removing it from negative CreditWatch. The outlook remains negative.

The downgrade reflects an update to Standard & Poor's distressed exchange criteria, including commutations of credit default swaps by bond insurers.

"Once a distressed offer or commutation is announced or otherwise anticipated, we lower the issuer credit and financial strength ratings to reflect the risk of nonpayment under a financial guarantee policy," Standard & Poor's said. "We generally lower the ratings to 'CC' and assign a negative outlook, reflecting the possible [selective default] issuer credit rating upon completion of the commutation."

Standard & Poor's said it took into consideration the slow progress Syncora is making with counterparties regarding settlements on its collateralized debt obligation of asset-backed security exposures. The negative outlook reflects the "lack of progress management has made on its commutation strategy," Standard & Poor's said.


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