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Multiple Bond Insurers Placed on S&P Credit Watch

By Susan Borries Reed, Director of Disclosure Strategy and Services, June 15, 2017

On June 6, 2017, S&P Global Ratings (S&P) placed the ratings assigned to municipal bond insurance providers (insurance providers), Build America Mutual Assurance Co. (BAM), MBIA Inc. (MBIA) and National Public Finance Guarantee Corp. (National) under review on a “CreditWatch Negative” based upon their evaluation of the bond insurers' competitive positions.  Currently, BAM holds an 'AA' financial strength rating, MBIA has an 'A-' long-term counterparty credit rating and National maintains an 'AA-' financial strength rating.

When an issuer’s bonds are insured by an insurance provider, rating actions affecting insurance providers also apply to the ratings on the bonds insured by this insurance provider.  Therefore, many issuers had bonds placed on a credit watch last week when S&P made this determination.

When a rating agency places credits on a credit watch, it is a signal to the market that the rating agency is evaluating whether a rating action is appropriate for the credit under review, and the rating agency then conducts a more detailed analysis to determine whether a rating adjustment is appropriate.  The credit watch is not a rating change, but rather an indication that the rating may change in the near future. In its press release, S&P announced that should BAM’s rating be “downgraded,” the agency does not expect to lower its ratings by more than one notch, which would equate to an AA-.  The rating agency also determined that the ratings of National and MBIA Inc. are not expected to be lowered by more than three notches.  S&P stated that no action is being taken on ratings assigned to another insurance provider, Assured Guaranty.

What does this mean for issuers?  Some of the impacts to issuers include:

  • Issuers with bonds insured by one of the bond insurers on a credit watch could be downgraded in the upcoming months.  If an issuer’s bonds are downgraded as a result of an insurance provider’s downgrade, this is a “material event” for any bonds subject to SEC Rule 15c2-12.
  • There could be some impact on issuers’ future debt as ratings impact the various options available to issuers when an insurance policy or a debt service reserve surety are needed to make the bond financing more marketable.

For more information, please contact Susan Reed at .(JavaScript must be enabled to view this email address)

Information in this article was believed current as of the date of publication. As you know, changes occur frequently. The information presented is of a general educational nature. Before applying to your specific circumstances, please contact us at


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