Fitch keeps FGIC on watch

Fitch Ratings said FGIC Corp. announced a definitive agreement to cede the bulk of its U.S. public finance portfolio to MBIA Insurance Corp. (unrated), as well as a settlement on a structured finance collateralized debt obligation in which substantial losses were anticipated by Fitch.

Offsetting these positive developments were significant increases in loss reserves on its residential mortgage-backed security exposures as well as the potential for future adverse loss development in a collateralized debt obligation portfolio, according to the agency.

FGIC has a long-term issuer rating of CCC- and $325 million 6% senior notes due Jan. 15, 2034 rated CCC-.

The Rating Watch negative reflects expectation that if continued stress causes the company's financial condition to deteriorate and triggers some form of intervention, regulators will likely prevent FGIC from paying dividends to FGIC Corp. in order to service its debt or other holding company operating expenses, the agency noted.

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