Fitch Places ACA Financial on Rating Watch Negative

May 6, 2004

Fitch Ratings announced that it has placed the ‘A’ insurer financial strength (IFS) rating of ACA Financial Guaranty Corp. (ACA) on Rating Watch Negative.

The bulletin described ACA as a “niche provider of financial guaranty insurance that insured nearly $8.6 billion of municipal and structured finance obligations as of Dec. 31, 2003. All obligations insured by ACA are also placed on Rating Watch Negative by Fitch.” The rating agency gave further details on these obligations in separate bulletins.

“Fitch has viewed ACA as requiring additional capital and liquidity to support its current book of insured business and anticipated growth,” the announcement continued. “Capital raising initiatives are necessary to sustain the company’s IFS rating at its current level (see Feb. 19, 2004 Fitch press release).

“While ACA’s parent company, ACA Holdings, filed a form S-1 with the Securities and Exchange Commission in February 2004 proposing to raise capital through the issuance of an initial public offering of common stock, no transaction has yet been completed. Without a near term resolution balancing business objectives with capital raising initiatives, a downgrade to ‘BBB’ can be anticipated.”

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