MBIA, Ambac, ACA Will Take `Massive' Losses, Egan Jones Says

By Christine Richard


Nov. 6 (Bloomberg) -- Bond insurers including MBIA Inc., Ambac Financial Group Inc. and ACA Capital Holdings Inc. face ``massive losses'' over the next few quarters that could test their ability to raise new capital, according to rating company Egan-Jones Ratings Co.

MBIA may have losses of $20.2 billion on guarantees and securities holdings, Sean Egan, managing director of Egan-Jones, said during a conference call. ACA Capital may take losses of at least $10 billion; Ambac Financial Group Inc. may reach $4.3 billion; MGIC Investment Corp. $7.25 billion; and Radian Group $7.2 billion, Egan said.

``There is little doubt that the credit and bond insurers face massive losses over the next few quarters and many will be capital challenged,'' Egan said.

The rating company's estimate of losses included those on existing guarantees, mainly on securities that rely on mortgages for repayment, and on securities holdings, he said. Egan Jones is paid by investors to rate debt, rather than by issuers.

Yesterday, Fitch Ratings said it will review the bond insurers after ``broader and deeper'' downgrades of collateralized debt obligations, which package debt such as subprime mortgage securities and loans.