Syncora Holdings Ltd., the Hamilton, Bermuda-based guaranty insurer, said it may not survive as an ongoing business unless it can restructure the rest of its credit default swap agreements as it reported a $493 million loss in the second quarter of this year.

The company also announced that its chief executive officer and president, Paul S. Giordano, 45, will step down. He will be replaced by Susan Comparato, 38, the current general counsel, who was named acting CEO and president.

The company said it has taken several moves to restructure its business, including reduction in headcount and discontinuation of payment of its dividend, which will not be paid for up to 18 months under an agreement with the New York State Department of Insurance.

That stock payment arrangement was part of a deal involving XL Capital Ltd. where Syncora severs its ties to the former parent, including elimination or commutation of reinsurance agreements, in exchange of a $1.77 billion payment by XL.

The deal also terminates credit default swap agreements between Merrill Lynch and Syncora for a payment of $500 million to Merrill Lynch. The XL payments will be reflected in the third quarter, Syncora said.

During a conference call with analysts Elizabeth A. Key, chief financial officer, said there "is substantial doubt" Syncora will be able "to continue as a going concern" because it may fall into negative surplus.

However, she said this depends upon the outcome of negotiations on the company's exposure to collateralized debt obligations of asset-backed securities. Even if those negotiations are favorable to Syncora, the company may still find that it cannot continue, she said.

Mr. Giordano said the company has a target date of Oct. 15 to renegotiate insurance agreements with 17 banks that would substantially curtail the company's exposure on mortgage securities.

The company has set aside $820 million toward these agreements. For the agreement to be successful the 17 banks must agree to the deal, he said. Twenty-two banks hold $59.4 billion in credit default swap exposure. Of that, the 17 banks in negotiation hold 89 percent, or $52.9 billion, of the credit default swap exposure.

The company has also renegotiated its reinsurance exposures with the aim of merging its subsidiaries Syncora Re and Syncora Guarantee and closing the Bermuda office.

As part of its restructuring, the company stopped writing new business in early 2008 and portions are being reincorporated to Delaware in an effort to free up capital and reduce expenses.

Edward B. Hubbard, executive vice president, financial guarantee insurance, said the company's losses are expected to be higher than originally forecast as the mortgage market continues to deteriorate and foreclosures continue to grow.

He said the company has substantial mortgage exposure to Pasadena, Calif.-based IndyMac Bank, which was taken over by federal regulators last month after a run on the bank.

Syncora, which changed its name this month from Security Capital Assurance Ltd.), reported second-quarter income dropped $519 million to a net loss of $493 million. Revenues fell 61 percent ($37 million) compared to the same period last year to $23 million.

For the six months, net income fell $653 million to a net loss of $590 million compared to last year. Total revenues dropped 87 percent ($109 million) to $16 million.

In closing remarks, Ms. Comparato said the restructuring with the banks "is the primary effort" in the company's reorganization and the company is "aggressively" reviewing ways to further reduce its exposures.

The primary goal of the company and the New York Department of Insurance is "to protect the municipal finance book," she said. She added that the bank negotiations involve a complex number of agreements and "should be an interesting process."

Yesterday, Fitch Ratings issued a revision that changed Syncora's rating watch from "Evolving" to "Positive." However, the rating service warned it did not have updated information at the time and said it could not determine the ultimate rating until it knows the outcome of settlements.

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Syncora Says It May Not Survive; Posts $493M Loss

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