Standard & Poor's yesterday downgraded Financial Guaranty Insurance Co. to CC from CCC before withdrawing its ratings on the bond insurer.

Recent financial statements released by FGIC and parent FGIC Corp. said that auditors had concerns about the companies' abilities to continue as going concerns, which "results in an event of default by FGIC Corp. under the terms of the company's revolving credit agreement."

FGIC does not have enough resources to meet payment on the $46 million outstanding on the facility "if it were to become due in full on an accelerated basis," although it is currently trying to secure a waiver, Standard & Poor's said. In addition, FGIC can't pay a dividend to FGIC Corp. because it has a negative earned surplus.

Standard & Poor's also assigned FGIC a negative outlook, saying that the losses suggested by the rating agency's estimates on residential mortgage-backed securities and collateralized debt obligations of asset-backed securities could cause the insurer to fall below minimum statutory capital requirements of $65 million. FGIC had a statutory surplus of $505 million at the end of last year, according to its financial statements.

Auditors said further adverse loss development in the portfolio that could breach FGIC's statutory requirements could be one of the risks in its ability to continue as a going concern. If FGIC falls below minimum capital levels, the New York Insurance Department could intervene, auditors said.

Standard & Poor's also withdrew FGIC's ratings, citing an expectation that "timely and comprehensive financial information will no longer be available."

With Moody's Investors Service withdrawing FGIC's ratings, the bond insurer no longer is rated by any of the three major rating agencies.

Bond insurer FGIC - which once placed among the top three financial guarantors by volume - recently reported an annual net loss of $1.1 billion for 2008. Its parent FGIC Corp. reported a net loss of $1.2 billion.

FGIC had municipal insured principal outstanding, net of reinsurance, with a value of $16.9 billion as of Dec. 31. MBIA Insurance Corp. earlier this year provided cut-through reinsurance on $188 billion of FGIC's public finance book.

Net of reinsurance, FGIC has $1.18 billion of exposure to troubled Jefferson County, Ala., sewer revenue warrants. FGIC had paid about $28.7 million on Jefferson County's insurance policy - part to pay principal on sewer warrants the county failed to pay and part on a debt service reserve fund policy to make interest payments on sewer warrants, according to court documents.

FGIC's entire portfolio contains $91.1 billion of principal insured outstanding, net of reinsurance. That includes $24 billion of mortgage-backed exposure and $16.4 billion of international exposure.

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