Moody's Investors Service said it may downgrade the financial strength rating of bond insurers Ambac Assurance Corp. and MBIA Inc., saying both companies face financial hurdles that need to be overcome in the face of the subprime mortgage crisis.
The New York-based rating service said any downgrade would "likely fall within the 'Aa' range, although a downgrade to the 'single-A' rating category is also possible."
Moody's said it is concerned that Ambac cannot cover potential shortfalls in the company's capital position as it has seen substantial decline in its market capitalization and high current spreads on its debt securities. The rating agency also questions the insurers ability to regain lost market and improve its underwriting.
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