Ambac Fallout Begins: Fitch Downgrades 420 ABS Issues

Boy, those agencies can move fast sometimes. Fitch downgraded bond insurer Ambac today from AAA to AA, which in turn meant any bonds who rating depended on an Ambac guarantee in turn needed to be downgraded. Fitch was ready and promptly announced a downgrade of 420 securities. One would assume that this comprises the sum total, but the press release (which contains the full list) is silent on that point:

Fitch Ratings downgrades 420 classes of asset-backed securities (ABS) Additionally, the ratings remain on Rating Watch Negative by Fitch. This action follows Fitch’s downgrade of the ratings on Ambac Financial Group, Inc. and its affiliated entities (Ambac).

For more information, please refer to the press release ‘Fitch Downgrades Ambac; Ratings Remain on Watch Negative’, dated Jan. 18, 2008, available on the Fitch Ratings web site at

The ratings of the following ABS transactions are supported by a financial guaranty policy provided by Ambac Assurance Corp., a subsidiary of Ambac Financial Group, Inc., and therefore are downgraded and remain on Rating Watch Negative.

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  1. sk

    Just for fun, I note you said 420 ABS issues. 420 in Hindi is “charsobis” which is( was 40 years ago anyway) a derogatory term, a term of abuse meaning con-artist.It comes from a certain section, section 420 in the Indian Penal code.

    Thought you’d enjoy that.


  2. Anonymous

    This is related tom derivatives, related to ABS and downgrades:

As of September 30, 2007, TERI had a Baa3 counterparty rating from Moody’s Investors Service, which is the lowest investment grade rating, and an insurer financial strength rating of A+ from Fitch Ratings, which was subsequently downgraded to a rating of A on October 25, 2007. TERI also had a rating of A from Dominion Bond Rating Service as of September 30, 2007. Dominion Bond Rating Service initiated coverage of TERI on May 15, 2007. If these ratings are lowered, FMC’s clients may not wish to enter into guarantee arrangements with TERI. In addition, FMC’s up-front structural advisory fee yields could decline or market conditions could dictate that FMC obtain additional credit enhancement for the asset-backed securitizations that it structures, the cost of which could result in lower revenues. Finally, if TERI’s ratings were downgraded below the ratings TERI held in January 2003, or if Moody’s Investors Service or Fitch Ratings were to place a negative watch on TERI, FMC’s agreement with Bank of America relating to the purchase of direct-to-consumer loans would terminate. In January 2003, TERI had a Baa3 counterparty rating from Moody’s Investors Service and an insurer strength rating of A from Fitch Ratings. If TERI experiences a material adverse financial change such as a reduction of its credit rating below investment grade, Bank of America could suspend the processing of new applications for school channel loans.

  3. Yves Smith


    Never underestimate the importance of synchronicity.

    Anon of 12:27 AM,

    Interesting indicator of unexpected sorts of collateral damage. Not sure I will have the opportunity to use it, but could you provide a link in case?

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