Ambac in Talks with Potential Partners to Help Boost Reserves
Bond insurer Ambac Financial Group Inc. said it was in talks with "very credible" potential partners that could help it boost its capital reserves. This comes on the heels of yesterday's posting of fourth-quarter losses of $3.26 billion in losses and triple-A credit rating cut by Fitch Ratings. Ambac still remains rated triple-A by Standard & Poor's and at Moody's Investors Service, but it is under review by Moody's.
Michael Callen, the New York bond insurer's acting chief executive, said the company was in contact with Wisconsin and New York insurance regulators and that it hoped to have some resolution soon.
The talks come at a crucial time for Ambac, amid turmoil in the company over how to cover potential losses from financial guarantees it wrote on billions of dollars of subprime mortgages.
The loss was largely expected because of an Ambac announcement last week. Investors were cheered by Ambac's report that it has been having talks with more than one strategic partner. In 4 p.m. composite trading on the New York Stock Exchange, Ambac shares rose $1.77, or 29%, to $7.97.
"We view the current perceptions of Ambac's business by both the market and ratings agencies as underestimating Ambac's strengths and future potential," Mr. Callen said yesterday.
Last week, Ambac said it planned to raise at least $1 billion by issuing more stock and equity-linked securities to meet Fitch's higher capital requirements.
Ambac withdrew the plan two days later as its share price plummeted, making a proposed equity issue far more costly to the company.
Published on January 23, 2008
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