MGIC Investment Corp. said Friday that it plans to defer a $17.5 million interest payment on $390 million of debt, and Standard & Poor's Corp. slashed the mortgage insurer's credit rating as a result.

The Milwaukee insurer said it was holding off on the payment so it can keep more cash on hand to cover rising mortgage losses.

The plan is not a sign MGIC will file for bankruptcy, the insurer said.

S&P lowered MGIC's credit rating seven notches, to CCC, the grade it gives companies that defer interest payments. James Brender, an S&P analyst, said it also downgraded MGIC's U.S. subsidiaries because of their "recent poor operating results and our concern that rising unemployment could delay MGIC's recovery."

MGIC has reported net losses for the past two years as mortgage delinquencies have surged. The rate on mortgages it insures has doubled during that time, to 12%.

The units' ratings were slashed five notches, to BB, or two steps into junk territory. They remain on review for further downgrade, S&P said.

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