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CIFG, Time for a New Slogan

Published on May 20, 2008 by in Research

CIFG’s slogan on their website is CIFG: The New Generation in Triple-A Financial Guaranty.

Well, about that, uhh I don’t know how to say this but I think you need a new slogan. CIFG was downgraded to Ba2:

Moody’s lowered its financial-strength ratings on CIFG Guaranty, CIFG Europe and CIFG Assurance North America to Ba2 from A1, a 7-notch downgrade, and said the future direction of the ratings is uncertain.

The credit rater said “absent material developments, the firm will fail minimum regulatory capital requirements in New York and Bermuda due to expected significant increases in modeled loss reserves on” asset-backed CDOs. Falling short on capital requirements “would put the firm in a precarious position, especially in light of the solvency provisions embedded in its” credit-default-swap exposures.”

Moody’s said as downgrades of residential mortgage-backed securities have continued this year, “Moody’s believes CIFG will experience sizable increases in reserves, and could breach regulatory capital requirements in the near future.” The company has already failed to meet some regulatory-filing deadlines in the U.S. and Bermuda, including first-quarter results for CIFG Assurance North America and the 2007 annual report for CIFG Guaranty.

Recommendation: CIFG the New Generation in Fallen Angel Financial Guaranty is quite catchy. But more accurate would be, CIFG Our Guaranty Is As Valuable As the Paper’s It’s Written On, Which Paper Is Rated By an Independent Third Party Which Says Our Paper Is Not Very Valuable Even Though It Used To Be.

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