Fitch Ratings has moved to reassess the credit ratings on thousands of municipal bonds insured by Financial Guaranty Insurance Corp (FGIC) and XL Capital Assurance Inc. (XLCA), both based in New York City, as a result of the rating agency's decision to downgrade the credit risk of the parent firms.

XL Capital Assurance is a wholly-owned subsidiary of Security Capital Assurance Ltd.

The new ratings predominately reflect the credit quality of the underlying municipality that issued the bonds.

The decisions follow the resolution by Fitch Ratings on March 26 to lower XLCA's insurer financial strength rating (IFS) to “BB” from “A” and FGIC's IFS rating to “BBB” from “AA.”

For example, for the 2,973 bonds insured by XLCA where Fitch maintains underlying ratings that are “A” or higher, no rating actions are being taken, as the ratings already reflect the issuers' underlying credit quality, the rating agency said.

And for the 464 issues insured by XLCA where Fitch maintains underlying ratings lower than “A” and higher than or equal to “BB,” Fitch has revised the ratings to their underlying ratings.

Fitch also said that for the two bond insurers involved in the downgrades, if particular bonds don't have Fitch Ratings and if Fitch determines that these issuers do not wish to have Fitch publish underlying ratings on their bonds, Fitch may withdraw its ratings based on the parent bond issuer “in the coming weeks.”

Special Reports /

Fitch Reassesses Municipal Bond Credit Ratings

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