S&P gives financial strength ratings of ‘AA’

Standard & Poor's Rating Services today lowered its financial strength ratings on Ambac and MBIA to 'AA' from 'AAA' and placed both companies’ ratings on CreditWatch with negative implications.

The ratings on the respective holding companies, Ambac Financial Group and MBIA Inc, have also been lowered to 'A' and 'A-' from 'AA' and 'AA-' and placed on CreditWatch with negative implications.

The rating actions on the companies reflect our belief that these entities will face diminished public finance and structured finance new business flow and declining financial flexibility. In addition, we believe continuing deterioration in key areas of the US residential mortgage sector and related CDO structures will place increasing pressure on capital adequacy. The 'AA' financial strength ratings of these companies are supported by currently sound claims paying ability and liquidity levels in our opinion.

Resolution of the negative CreditWatch will be dependent on clarification of ultimate potential losses as well as future business prospects, the outcome of strategic business decisions, and potential regulatory developments.