Bond Insurers Downgrading

Calculated Risk caught this nugget from Moody's on Friday and it could have implications for Pittsburgh depending on how several bond offerings have been written:

FGIC Corp. and XL Capital Assurance Inc., two bond insurers, may lose their Aaa credit ratings at Moody's Investors Service after a slump in the value of the debt they guarantee.

MBIA Inc., the largest bond insurer, and CIFG Guaranty had their outlooks lowered to ``negative'' by the New York-based ratings company today

Remember, FGIC insured a significant portion of the Pittsburgh's debt as of 2003. MBIA insured the 2005 debt refinancing/capital improvement budget. Both of these insurers are facing severe pressures on their balance sheets as more policies either are currently paying out, or look like they will need to pay out. This increased pressure devalues the guarantee, which may lead to higher debt servicing costs for the city.