California Util Pose Minimal Risk to Bond Insurers' Rtgs, Fitch.Business Editors NEW YORK--(BUSINESS WIRE)--Dec. 22, 2000 The monoline financial guarantors -- MBIA MBIA Montana Building Industry Association MBIA Municipal Bond Insurance Association MBIA Michigan Boating Industries Association MBIA Municipal Bond Investors Assurance MBIA Massachusetts Brain Injury Association MBIA Maryland Business Incubation Association Insurance Corp., Ambac Assurance Corp., Financial Security Assurance Inc., and Financial Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. Insurance Co.-- all have varying degrees of exposure to Pacific Gas & Electric (PG&E) and Southern California Edison Southern California Edison (or SCE Corp), the largest subsidiary of Edison International (NYSE: EIX), is the primary electricity supply company for much of Southern California. It provides 11 million people with electricity. (SCE SCE (in Scotland) Scottish Certificate of Education SCE n abbr (= Scottish Certificate of Education) → Schulabschlusszeugnis in Schottland ). These two California electric utilities are currently facing intense cash pressures due to sharply rising fuel costs that they cannot pass on to consumers due to regulatory constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. (see separate Fitch comments on California Electric Utilities). However, Fitch believes this exposure poses little risk to the insurers' `AAA' financial strength ratings. The bond insurers and rating agencies are all closely following the developments surrounding the utilities with concern. Given the volatility of the situation and the delicate balancing act being played out among numerous constituencies, further credit deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. of the utilities cannot be ruled out. However, significant permanent losses to the bond insurers on these credits are viewed as unlikely, given the enormous political and social pressures to keep the utilities solvent and the fact that most of the debt is secured by first mortgages. In fact, Fitch believes this is the very type of situation that bond insurers are ideally suited to protect against -- risks which entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary potential temporary disruptions in debt service, but where substantial recoveries are extremely likely. The insurers' actual exposures to PG&E and SCE are shown below. In MBIA's case, the exposures are quite large. However, Fitch believes that all the insurers have adequate resources to meet debt service requirements. Net Par In Force ($ Mil.) MBIA Insurance Corp. Southern California Electric, 438 Pacifica Gas and Electric, 590 Ambac Assurance Corp. Southern California Electric, 75 Pacifica Gas and Electric, 73 Financial Security Assurance Inc. Southern California Electric, 6 Pacifica Gas and Electric, 13 Financial Guaranty Insurance Co. Southern California Electric, 15 Pacifica Gas and Electric, none |
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