Outstanding Auto Loans Get MBIA Warning

Fitch Ratings, the well known credit rating agency, has informed MBIA, Inc. that they could be facing a possible downgrade on their rating due to the amount of auto loan debt that they have outstanding, and unpaid. With the amount of mortgages that are defaulting in recent months, they are concerned that the amount of unpaid debt will become too high for the bank to handle.

They are considered to be on a “negative watch” and could be downgraded – which would be damaging to the company. They say that they are concerned with the way the market has been heading and want the company to find $1 billion in new capital within the next six weeks or they will face a possible downgrade.

They will be reduced from a “AAA” rating, which would make it difficult to secure more auto loans and collateral should that happen. The company’s new warning means that they do not have enough of a “financial cushion” should the market continue on the way it has, and it could become a liability.

The reason it is so important for the company to not lose their rating is because it will make it harder for them to get bonds and bond insurers. Bond insurers protect investors against issuers that default on their debt – be it car loan or mortgage, or any of another number of securities. They are finding that as more and more people have started defaulting first on their mortgages and then on their auto loans, concerns in regard to asset backed securities have also risen.



Back to January 2008 Archives