Insurer-Cut 'Hurricane' Hits

Yields on floating-rate, tax-exempt debt insured by MBIA Inc. and Ambac Financial Corp. soared as high as 9 percent last week as investors dumped the securities after the companies' credit ratings were cut by Moody's Investors Service on June 19. The spiraling debt costs are reminiscent of those that followed the collapse of the auction-rate securities market in February.

"You survived the big waves, then the next thing you know, you've got the hurricane coming," said Brian Mayhew, chief financial officer of the Bay Area Toll Authority, which saw costs jump as high as 7 percent on $1.8 billion of bonds backed by Ambac even before the downgrades. "This is clearly the storm. This is what we thought would never ever happen."