Tuesday, November 27, 2007

A Business I Never Understood-4

"In the first sign of relief for the troubled bond-insurance industry, financial guarantor CIFG Holding said it will receive a $1.5 billion capital injection from controlling shareholders of its French parent so it can preserve its imperiled triple-A credit rating. ... Thomas Abruzzo, a managing director and credit analyst at Fitch, said CIFG and its owners 'were very proactive in arranging this plan'. 'Becuse of this capital infusion, we're able to reaffirm their rating and they were able to get ahead of any negative commentary resulting from our analysis;', he said", WSJ, 23 November.

The guarantors can't stand on their own. What do the rating agencies do, if the guarantors can avoid "negative commentary"? Should CIFG be consolidated with Banque Populaire and Caisse d'Epargne? Who really owns CIFG?

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