Standard & Poor’s today placed on watch for downgrade ACA Capital’s A rating due to the company’s $1 billion third-quarter net loss, which S&P analysts think will inhibit ACA’s ability to attract future business. Should ACA get downgraded, the company would have to answer liquidity calls on its $1.7 billion of unrealized structured credit mark-to-market losses (TS, 11/08), Alan Roseman, ACA ceo, said during the earnings call Thursday.
An action on ACA’s rating is expected within 90 days. Of the 15 monolines rated by S&P, ACA is the only one with an A rating, and also the only one rated by one agency. AA-rated PMI Guarantee is the only other S&P-rated monoline on negative watch while CIFG and RAM Reinsurance are both on negative outlook. “They’re just [in trouble],” an official at one CDO manager said of ACA. “Their main reputation is as a CDO asset manager and a lot of their CDOs are getting [downgraded]. We never saw very many ACA-wrapped deals.”
Since 1990, 59% of all companies placed on negative watch by S&P were downgraded, 35% have been affirmed, 5% had their rating withdrawn and 1% was were upgraded.
ACA officials did not return calls for comment.