Ambac Raises Money Needed to Avert Ratings Cuts
Today bond insurer Ambac Financial Group Inc reported that it sold $1.5 billion of shares and convertibles, protecting the company from ratings cuts but not satisfying some analysts who wanted the company to raise more.
Ambac said it sold $1.25 billion of common shares at $6.75 a share, or 9 percent below their closing price on Thursday. The stock offering nearly tripled the number of Ambac shares outstanding.
The company also sold $250 million of mandatory convertible securities, paying 9.5 percent per year and with a conversion premium of 18 percent. Those securities convert to shares beginning in 2011.
"With this $1.5 billion capital raise ... we believe that our Ambac Assurance subsidiary will maintain its triple-A financial strength ratings," said Ambac Chief Executive Michael Callen in a statement.
The bond insurer needs to shore up its capital base as it faces big expected payouts from guaranteeing sub-prime mortgage bonds and other risky debt. Rating agencies said on Wednesday that they would likely affirm Ambac's top ratings if it successfully issued securities.
"I'd rather they didn't need new capital. But hopefully this will take care of one of the lingering concerns about the company," said Peter Kovalski, a portfolio manager at Alpine Woods Capital Investors, which owns Ambac shares and ordered more in this offering.
Published on March 7, 2008
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