NEW YORK - Standard & Poor’s today downgraded MBIA Inc.’s public finance subsidiary National Public Finance Guaranty Corp. to A from AA-minus. Its outlook is developing.

Standard & Poor’s cited its “view of both [National’s] uncertain business and capital-raising prospects.” The agency said National’s capital adequacy is below Standard & Poor’s AA standard.

“Management’s stated goals are to raise additional capital to bolster National’s current resources and effectively ring-fence National from MBIA and its more volatile book of business,” analyst David Veno said in a statement. “However, the ring-fencing actions it has taken so far have had limited impact in that we view National as no more or less ring-fenced than any typical bond insurance subsidiary operating in a consolidated group.”

MBIA Inc. in February split the public finance and structured finance books of MBIA Insurance Corp. National received the public finance book and about $5 billion.

The restructuring has since come under legal challenges from structured finance policyholders and surplus noteholders. Standard & Poor’s said the lawsuits serve as an “impediment to both business prospects and capital-raising efforts.”

Standard & Poor’s also downgraded MBIA Insurance Corp. to BBB from BBB-plus, and MBIA Inc. to BB from BB-plus. The outlook for both is negative.

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