New and continuing reviews

Philip Bayley
Assured Guaranty Corp. completed its acquisition of Financial Security Assurance Inc. at the end of June but since before that time Fitch has had its 'AA' and 'AA+' insurer financial strength ratings on the former and the latter on Rating Watch Evolving and Negative, respectively. Last week, it moved the Rating Watch on the former to Negative.

Fitch is currently in the process of analysing the insured portfolios and overall capital adequacy of Assured and recently acquired FSA. The Rating Watch Negative reflects concerns with respect to further credit deterioration in mortgage-related exposures, which could negatively affect the capital positions of the companies. It also more appropriately reflects the risk that the IFS and debt ratings of these companies could be downgraded, absent remedial actions.

Fitch's analysis will take into consideration any capital enhancement initiatives or efforts to reduce risks within the insured portfolios being undertaken by the companies. Further, Fitch's ratings recognize that the operating platform provides some flexibility to shift risk among operating companies, which could result in different ratings levels for the key operating entities.

Currently, Fitch rates FSA one notch higher than AGC, reflecting FSA's superior capital position relative to Assured. Fitch expects to complete its ratings review over the next four to six weeks.

Moody's placed the ratings of four banks in the United Arab Emirates on review for possible downgrade reflecting the rising challenges facing the sector, chiefly triggered by the stressed domestic property market (especially in Dubai), as well as the economic slowdown forecast for 2009, with a modest recovery in 2010.

Emirates Bank International, which has A$250 million of bonds (maturing in November) outstanding in the Australian domestic market was one of the banks affected. Moody's assigns 'A1' deposit and senior debt rating and a 'C' bank financial strength rating to the bank.

The review is expected to be completed in the next few months and based on its stress test results, Moody's does not, at this stage, anticipate that a multi-notch downgrade will be warranted for any of the rated entities.

As with Moody's the week before, S&P is continuing its CreditWatch with negative implications on the Goodman Group. S&P is similarly relieved, with analyst Craig Parker stating, "In our view, Goodman's capital-management initiatives have significantly reduced our concerns regarding the group's liquidity profile in the next two years. However, Goodman's near-term pro forma look-through credit metrics remain weak for the 'BBB' rating."

Unlike Moody's, S&P did not hint that the 'BBB' long-term rating assigned to Goodman would be affirmed. The CreditWatch should be concluded over the next month.