Standard & Poor's Friday put its A rating for Financial Guaranty Insurance Co. on credit watch with negative implications. The rating had been on watch with developing implications.

In explaining the change, Standard & Poor's cited FGIC's likely inability to write new business or raise new capital. FGIC recently announced that it would cease writing new business, while the bond insurer's principal owner, the PMI Group, said it no longer views FGIC as a worthwhile investment and will not contribute any additional capital to it.

"In our opinion, these announcements negatively affect the company's ability to implement plans to raise additional capital and resume writing business in the future," Standard & Poor's wrote.

In February, FGIC approached insurance regulators in New York, asking for a new license which would smooth the way for the bond insurer to split up its books. Under the plan, FGIC said the new license would be used to establish a company only insuring municipal business, leaving the structured finance policies to remain under the FGIC name, according to Standard & Poor's.

Whether the plan is ultimately successful or not, FGIC's prospects to write new business and attract additional capital are likely negative, the rating agency said.

"Under either scenario, prospects for a rating upgrade for FGIC are difficult to envision," Standard & Poor's said.

A spokesman for FGIC declined to comment.

FGIC is rated A3 and on review for possible downgrade by Moody's Investors Service. Fitch Ratings has the credit at AA with a negative outlook.

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