Update: Municipal Insurers' Rating Downgrades

In previous issues of Footnotes, we described the potential downgrade in credit ratings of certain municipal bond insurers and the implications. As of March 12, 2008, four bond insurers had been downgraded by one or more rating agencies.

Ambac Assurance Corporation and CIFG Assurance North America, Inc. were downgraded by Fitch Ratings from a "AAA" to "AA" and "AA-", respectively. CIFG Assurance North American, Inc. was also downgraded by Standard & Poor's Corporation from a "AAA" to "A+".

Fitch Ratings, Moody's Investors Service and Standard & Poor's Corporation downgraded XL Capital Assurance Inc. from a "AAA" to "A", "A3" and "A-", respectively. All three rating agencies also downgraded the credit ratings of Financial Guaranty Insurance Company from a "AAA" to "AA", "A3" and "A", respectively.

Generally, these credit downgrades reflect uncertainties surrounding the holding companies, including future earnings, and coverage ratios. They also reflect the uncertainty in the financial guaranty market.

Downgrades of credit ratings are material events, pursuant to SEC Rule 15(c)2-12, and must be reported to the national repositories and made available for bondholders. Umbaugh assists many of our clients with continuing disclosure requirements such as this.