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Financial Security Assurance Inc. Issues Statement in Response to Announcement of Moody's Downgrade of FSA from Aaa to Aa3 with Developing Outlook.

Article Excerpt
NEW YORK -- In response to Moody's Investors Service's (Moody's) downgrade of bond insurer Financial Security Assurance Inc. (FSA) to Aa3 with developing outlook, Robert P. Cochran, chairman and chief executive officer of Financial Security Assurance Holdings (FSA Holdings or the Company) and Financial Security Assurance Inc. (FSA), said: "We disagree with Moody's on a number of points and believe that the downgrade to Aa3 reflects hypotheses about future market and credit environments rather than the fundamental credit strength of the company. Based on its Special Comment on the financial guaranty industry published yesterday, it appears that Moody's has moved in the direction of believing that no financial guaranty company can be rated Aaa."

In its announcement, Moody's said that the developing rating outlook for FSA reflects a potential positive movement in the company's financial and business profile post-acquisition by Assured Guaranty, assuming FSA is capitalized and positioned as an ongoing writer of high-quality financial guaranty insurance within the group. FSA continues to be rated AAA/Negative Watch by Fitch Ratings (Fitch) and Standard & Poor's Ratings Services (S&P).

In the same rating action, Moody's downgraded the debt ratings of FSA Holdings to A3 from Aa2.

Bond Insurance Continues to Play a Key Role in Public Finance Markets

Given the challenges that face public sector credits, with declining revenue streams and growing needs, the Company believes there continues to be an important role for FSA to play in lowering borrowing costs for well-run, well-structured public finance issuers, while providing experienced credit selection, negotiation of terms, remediation and payment of claims when necessary for the protection of municipal investors. Further, highly rated municipal bond insurance brings much needed liquidity to the...

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