Moody's drops Ambac

Moody's Investors Service said it has downgraded to Baa1 from Aa3 the insurance financial strength rating of Ambac Assurance Corp. and Ambac Assurance UK Ltd.

In the same rating action, Moody's said it downgraded the debt ratings of Ambac Financial Group, Inc. (senior unsecured debt to Ba1 from A3) and related financing trusts, adding that the rating action concludes a review for possible downgrade that was initiated on Sept. 18, and reflects Moody's view of Ambac's diminished business and financial profile resulting from its exposure to losses from U.S. mortgage risks and disruption in the financial guaranty business more broadly.

The outlook developing.

As a result of the rating action, the Moody's-rated securities that are guaranteed or "wrapped" by Ambac are also downgraded to Baa1, except those with higher public underlying ratings.

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