Ambac Rescue Deal in the Works Needs More Time
A person familiar with the Ambac Financial Group Inc matter stated that any deal to rescue the bond insurer would likely be signed early next week rather than today or tomorrow as previously intimated.
According to people familiar with the situation, the deal is enormously enormously complicated and requires the agreement of a large number of parties, including banks, regulators and rating agencies.
The second-largest bond insurer is looking to raise $3 billion of new capital after writing down more than $5 billion of assets in the fourth quarter, a person familiar with the matter said over the weekend.
Ambac is also looking at separating its municipal bond insurance business, which is unlikely to face big payouts, from its structured finance insurance business, which is likely to make big payouts in coming years.
Splitting up the businesses may be the best way to ensure the municipal bond insurance operations can win new business, analysts said.
"New capital would be a plus, but it would be a Band-Aid," said Rob Haines of independent research firm CreditSights, "and it wouldn't address the fundamental concern here, that there could be more deterioration in the structured finance business."
At least two bond insurers, industry leader MBIA Inc and FGIC Corp, have announced plans to divide their municipal bond insurance businesses from their other insurance operations.
Ambac is working with a group of banks, including Allianz' Dresdner Bank. Dresdner Bank's head of investment banking operations said the bank plans to support a rescue package.
Published on February 26, 2008
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