Fitch Rates FSA's Junior Subordinated Debentures 'AA-'; Outlook Stable

Business Wire, March 2, 2007

NEW YORK -- Fitch Ratings assigns an 'AA-' rating to Financial Security Assurance Holding Ltd.'s (FSA Holdings) $300 million junior subordinated debentures with a scheduled maturity date of 2036 and a final payment date of 2066. Fitch also affirms the 'AAA' insurer financial strength (IFS) rating assigned to Financial Security Assurance Inc. (FSA) as well as the 'AA' senior debt rating of FSA Holdings. FSA Holdings, the parent company of FSA, is an indirect subsidiary of Dexia S.A. (Dexia), a Belgian financial institution with a long-term rating of 'AA ' and an individual bank rating of 'A/B'. The Rating Outlook for all entities is Stable.

FSA Holdings issued the junior subordinated debentures in November 2006 and has subsequently paid a $300 million dividend to Dexia, reducing FSA Holdings' overall cost of capital and enabling Dexia to re-deploy capital to other purposes. The debentures will pay a fixed rate of interest until December 2036. After that the debentures will pay a floating rate based on one-month LIBOR plus a margin that is expected to result in a step-up of 100 basis points (bps) over the initial fixed rate, based on current spreads. FSA Holdings has the right to defer interest for up to 10 consecutive years.

Based on Fitch's new hybrid rating criteria published on Sept. 27, 2006, the debentures have a high equity component. Fitch has assigned a class D designation to the debentures and will allocate 75% of the principal to adjusted equity and 25% to adjusted debt in evaluating the financial leverage of FSA Holdings. Key features supporting the 75% equity credit accorded to the debentures include the junior subordinated ranking, 10-year deferral period, and a long maturity with no put provision. FSA Holdings' call option at any time is balanced by a replacement capital covenant for the benefit of certain designated indebtedness of FSA Holdings not to redeem the debentures prior to 10 years before the final repayment date in 2066 unless replaced by the issuance of similar equity-like securities.

Including the impact of the enhanced junior subordinated debentures, FSA Holding's equity-credited adjusted leverage was 15.9% at Dec. 31, 2006, which is within Fitch's stated 16.0% guideline for the holding company of a financial guarantor. Further, Fitch expects FSA's equity-credited adjusted leverage to decline over the intermediate term due to growth in retained earnings.

Fitch assigns the following ratings:

Financial Security Assurance Holdings Ltd.

--$300 million junior subordinated debentures 'AA-'.

Fitch affirms the following ratings with a Stable Outlook:

Financial Security Assurance, Inc.

Financial Security Assurance U.K.

FSA Insurance Company

Financial Security Assurance International Ltd (Bermuda)

--Insurer financial strength of 'AAA'.

Financial Security Assurance Holdings Ltd.

--Senior debt 'AA'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.