Fitch Places ACA Financial Guaranty Corp. on Rating Watch Negative

Business Wire, May 5, 2004

Business Editors

NEW YORK--(BUSINESS WIRE)--May 5, 2004

Fitch Ratings places the 'A' insurer financial strength (IFS) rating of ACA Financial Guaranty Corp. (ACA) on Rating Watch Negative. ACA is 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 (see separate press release).

Fitch has viewed ACA as requiring additional capital and liquidity to support its current book of insured business and anticipated growth. 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.