Despite Allegheny Health, Education and Research Foundation's recent Chapter 11 bankruptcy filing, Standard & Poor's says the ratings of MBIA Insurance Corp. and other bond insurers "are not at risk because of their exposure to the healthcare industry."
Armonk, N.Y.-based MBIA, with a $38 billion healthcare portfolio, backs $256 million of AHERF's debt. But in a recent article appearing in Standard & Poor's CreditWeek Municipal, agency analysts say MBIA's exposure does not pose a danger of downgrade. Even if MBIA lost the full amount of its exposure, the bond insurer's AAA credit rating would remain unchanged, says Robert Green, a director at Standard & Poor's.
Although Green and his colleagues acknowledge that the healthcare industry is facing challenging times, they don't expect "a rash of negative or extreme rating changes on hospital revenue bonds." Hospital administrators, they say, have a good record of adjusting.
They also say the track record of bond insurers is "quite positive."
The healthcare industry's four main insurers-MBIA, Ambac Assurance Corp., Financial Guaranty Insurance Co. and Financial Security Assurance-all AAA rated-back $63.9 billion in healthcare debt. Only seven healthcare deals, which the article did not identify, have ever resulted in claims against bond insurers. Losses totaled just $43.7 million. Green says he could not identify those deals because the information was provided privately to Standard & Poor's.