ACA Capital Holdings Inc. said Thursday that it has reached agreements with its counterparties that will prevent the ailing bond insurer from having to post collateral as a result of Standard & Poor's Corp.'s cutting a unit's credit rating to junk status.
In the meantime, the New York company said it has ceded some control over its financial guarantor subsidiary, ACA Financial Guaranty Corp., to Maryland insurance officials.
ACA Capital's counterparties waived collateral posting requirements and termination rights relating to ACA Financial's credit rating. The agreement will be in effect until Jan. 18.
As a result of the agreement, the Maryland Insurance Administration will not institute any delinquency proceedings under the terms of a previous consent agreement with ACA Financial.
The unit had agreed not to object to a petition by the state's insurance commissioner to institute delinquency proceedings if S&P cut ACA Financial's credit rating and a forbearance agreement was not signed by all counterparties.
ACA Financial is the only bond insurer that has lost its investment-grade rating. When it cut the rating last week, S&P said it had "significant doubt" that ACA Financial could come up with the capital needed to resolve its problems.
