NEW YORK (AP) - Fitch Ratings said Monday it is maintaining its top-notch
rating on MBIA Inc. despite the bond insurer's request for the ratings agency to
stop rating the company.
Withdrawing its ratings would disrupt the bond market by forcing funds to
sell investments they want to keep, Fitch said.
Earlier this month, the Armonk, N.Y.-based insurer asked Fitch Ratings to
discontinue assigning a grade to the company's ability to meet insurance claims.
Fitch was still deciding whether to downgrade MBIA, even as the other two
major ratings agencies had affirmed the company's rating. MBIA, which writes
insurance policies promising to repay bondholders when bond issuers default,
stopped providing Fitch with certain information and statements the agency uses
to judge financial strength.
Fitch said despite the request, it is keeping a "AAA" rating on MBIA. The
ratings agency talked to some investors and determined that withdrawing its
ratings would be disruptive to markets.
Many investment funds can own only bonds carrying a strong credit rating.
When MBIA, which insures almost $680 billion in bonds, writes an insurance
policy on a bond, the bond assumes MBIA's top-caliber rating instead of the
credit rating of the bond issuer itself.
By withdrawing its rating, Fitch said many of these investment funds would
be forced to sell MBIA-insured bonds because they would lose the top-level
rating. With certain corners of the bond market already starved for buyers, this
could trigger further turmoil, Fitch said.
Fitch said it believes it can accurately assess financial strength based on
public information. The ratings agency intends to continue rating MBIA as long
as Fitch can "maintain a clear, well-supported credit view without access to
certain non-public details."
"While we respect MBIA's decision not to provide us that information, we
trust that they will respect our decision to continue to maintain a rating on
MBIA, a company about which many investors are so clearly interested," Fitch
Chief Executive Stephen W. Joynt said in a statement.
The prospect that Fitch or one of the other ratings agencies would downgrade
MBIA has hammered the company's stock over the past six months. A bond insurer
without top-caliber ratings would have trouble winning new business.
Shares of MBIA climbed $1.39, or 10.9 percent, to $14.16 in midday trading.
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