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Ambac Rises as Banks Plan $3 Billion Rescue to Avert Downgrade
By Cecile Gutscher and Erik Holm
Feb. 25 (Bloomberg) -- Ambac Financial Group Inc. rose to the highest in a month on investor expectations the bond insurer may be rescued from crippling credit-rating downgrades by getting $3 billion in new capital.
Ambac, the second-biggest bond insurer after MBIA Inc., may announce an agreement this week, according to a person with knowledge of the discussions who declined to be named because the details aren't complete. The New York-based company plans to raise $2.5 billion by selling stock at a discount to existing shareholders and $500 million from issuing debt, the Wall Street Journal reported today, citing people familiar with the matter.
``Maybe we'll see light at the end of the tunnel soon,'' said Geraud Charpin, head of European credit strategy at UBS in London. ``That would be good news for banks.''
Citigroup Inc. and seven other banks are working with Ambac to prevent rating cuts that would throw doubt on the credit quality of the $553 billion of municipal and asset-backed securities it guarantees. Banks stand to lose as much as $70 billion from any downgrades to Ambac, MBIA Inc. and FGIC Corp., Oppenheimer & Co. analysts estimated.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aYwW8jmcoCss&refer=us
By Cecile Gutscher and Erik Holm
Feb. 25 (Bloomberg) -- Ambac Financial Group Inc. rose to the highest in a month on investor expectations the bond insurer may be rescued from crippling credit-rating downgrades by getting $3 billion in new capital.
Ambac, the second-biggest bond insurer after MBIA Inc., may announce an agreement this week, according to a person with knowledge of the discussions who declined to be named because the details aren't complete. The New York-based company plans to raise $2.5 billion by selling stock at a discount to existing shareholders and $500 million from issuing debt, the Wall Street Journal reported today, citing people familiar with the matter.
``Maybe we'll see light at the end of the tunnel soon,'' said Geraud Charpin, head of European credit strategy at UBS in London. ``That would be good news for banks.''
Citigroup Inc. and seven other banks are working with Ambac to prevent rating cuts that would throw doubt on the credit quality of the $553 billion of municipal and asset-backed securities it guarantees. Banks stand to lose as much as $70 billion from any downgrades to Ambac, MBIA Inc. and FGIC Corp., Oppenheimer & Co. analysts estimated.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aYwW8jmcoCss&refer=us
