Standard & Poor’s Monday dropped MBIA Insurance Corp. to junk status, lowering the insurer’s credit rating to 'BB+' from 'BBB'. The outlook is negative.

The rating agency also lowered MBIA’s counterparty credit rating on MBIA Inc., the group holding company, to 'BB-' from 'BB'.

At the same time, S&P affirmed its A rating on National Public Finance Guarantee Corp., an affiliate of MBIA. National’s outlook is developing.

“We downgraded MBIA and the holding company because macroeconomic conditions continue to contribute to losses on the group’s structured finance products,” credit analyst Damien Magarelli said in a press release.

National is not exposed to structured products, but S&P questions the company’s efforts to raise capital and its aim to separate National’s business from MBIA’s riskier products.

“The ring-fencing actions it has taken so far have had limited impact in that we view National as no more or less ring-fenced than any typical bond insurance subsidiary operating in a consolidated group,” according to S&P. “In addition, the legal challenges the company faces as a result of its restructuring are, in our opinion, an impediment to both business prospects and capital-raising efforts.”

As far as National is concerned, if current litigation ends in its favor, that may result in a credit upgrade for the insurer in the double-A category. On the other hand, continued lack of market acceptance and weak liquidity could lead to a credit downgrade to the 'BBB' category.

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