As you may know, many of the major bond insurance firms in the municipal bond market have either seen their ratings down-graded or placed on negative credit watch or outlook by the leading municipal credit rating services (Moody’s Investors Service, Inc., Standard & Poor’s and Fitch Ratings). These changes have stemmed largely from the insurers’ exposure to investment vehicles tied to subprime mortgage loans. The credit rating agencies have indicated that their ratings on insured bond issues will in most cases decline as the ratings of bond insurers are lowered. In general, the rating on insured debt will be the higher of (i) the insured rating determined on the basis of the financial strength rating of the insurer and (ii) the underlying rating, if any, assigned to the insurer.
To view a full Client Advisory on this topic by Richard A. Manley Jr. and Walter J. St. Onge III of Edwards Angell Palmer & Dodge’s Public Finance Department, please click here.
