Fitch Ratings said Wednesday that it is placing Security Capital Assurance Ltd. (SCA) and its financial guaranty insurance subsidiaries on a negative rating watch, sending the AAA-rated bond insurer's shares plummeting 22% to close at $5.45. The ratings agency is considering the downgrade because of Security Capital's exposure to CDOs backed by subprime collateral and a possible capital shortfall of $2 billion. Fitch has given Security Capital four to six weeks to boost its capital adequacy. "If SCA is unable to meet capital guidelines in the noted timeframe, Fitch would expect to downgrade SCA's ratings... to AA," Fitch said. SCA CEO Paul Giordano said the company is already working on finding ways to supplement its capital supply. "Our plan involves a range of options for increasing our capital position within the time period indicated by Fitch," he said. Other bond insurers, including MBIA Inc. (MBI -- full story), Ambac Financial (ABK), CIFG Guaranty and Financial Guaranty Insurance Co., are also threatened with downgrades.
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