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An Attempt At A New Monoline Thread


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Is it hit or fold then? Anyone know yet?

I think if it was a downgrade they'd have gone for Friday evening to give them the weekend to calm nerves, so I'm punting on a refinance deal.

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Ambac Trading Halted Pending Statement, NYSE Says (Update2)

By Christine Richard

March 5 (Bloomberg) -- Ambac Financial Group Inc., the bond insurer facing a crippling credit-rating downgrade, had its shares halted pending an announcement, according to the New York Stock Exchange.

Ambac gained 63 cents, or 5.9 percent, to $11.35 at noon in New York Stock Exchange composite trading, before trading was halted. Ambac's rescue agreement may be completed today, with Citigroup Inc. and Barclays Plc leading the talks, CNBC said, without citing anyone. The banks are trying to arrange a capital raising of about $2.5 billion and are considering a rights offering to sell stock to existing shareholders, CNBC said.

Ambac is seeking to stave off a downgrade of its AAA rating after posting record losses on subprime guarantees. The loss of Ambac's top rating would cast doubt on $556 billion of municipal and asset-backed securities insured by the company, forcing some investors to sell the debt and others to reduce their holdings.

``The trump card in the market for a while has been the bond insurers,'' said Scott MacDonald, head of research at Aladdin Capital Management LLC in Stamford, Connecticut, which oversees about $20 billion in assets. ``We need to get past this if we're going to get to some sense of normalcy in the market.''

Raising money for Ambac would allow the banks to help themselves as well by avoiding writedowns on the Ambac-insured debt they own.

Fitch Ratings downgraded Ambac's bond insurance rating to AA from AAA on Jan. 18. Moody's Investors Service and Standard & Poor's are considering cutting the rating.

Moody's said it would probably affirm Ambac's Aaa rating, however, if its ``capital strengthening activities'' are successful. S&P said last week it is reviewing Ambac's rating for a downgrade, pending a raising of capital.

David Neustadt, a spokesman for New York State Insurance Superintendent Eric Dinallo, didn't return a call for comment. A message for Paul Burke, a spokesman for Ambac, wasn't immediately returned.

PS The DOW doesn't seem to like it!

Edited by REP013
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It's amazing that because of this Ambac rescue half a dozen private banks have it within their power to send the world stock markets a few percent one way or the other. Just on their whim. How tempting must it be to take advantage of the situation? Short the market and say the deal has fallen through (even though you'll in fact 'find common ground' and sign next week), or go long and sign up (of course with wide rights to back out/pull the plug).

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mbac to Sell Common Stock, Equity Units to Bolster Capital

By Christine Richard and Bryan Keogh

March 5 (Bloomberg) -- Ambac Financial Group Inc., the bond insurer facing a crippling credit-rating downgrade, will sell common stock and equity units to bolster its capital.

The offering will be managed by Credit Suisse, Citigroup Inc., Bank of America Corp. and UBS AG, New York-based Ambac said today in a regulatory filing.

DOW not liking it ....

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the market doesn't like it because it was hoping the previously rumoured banks (suspected to have the biggest default exposure) are not digging into their own pockets for the bailout. Who in their right mind is going to subscribe to the issue if they don't have to?

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Ambac to Sell Half the Company, Bet May Not Pay Off

Love the title, here are the details ...

March 6 (Bloomberg) -- Ambac Financial Group Inc., the bond insurer seeking capital to salvage its AAA credit rating, will sell half the company in a bet some investors say won't pay off.

Ambac said yesterday it plans to issue $1 billion of common stock, more than doubling the number of shares outstanding. The New York-based company will also offer $500 million of units that convert to shares in 2011.

Investors had anticipated Ambac would be bailed out by banks, which would backstop a capital raising of as much as $3 billion, enough to overcome record losses on subprime-mortgage debt. Instead, the company announced it would raise half that amount in a transaction that would dilute existing shareholders, sending Ambac down 19 percent in New York Stock Exchange trading.

``The new offering is highly diluting to existing shareholders,'' Jim Ryan, an insurance analyst at Morningstar Inc. said in an interview with Bloomberg Television. ``The market was looking for a backstop, to say the least.''

The sale of common stock, managed by Credit Suisse Group, Citigroup Inc., Bank of America Corp. and UBS AG, is scheduled for tonight, according to data compiled by Bloomberg.

Ambac fell 26 cents to $8.44 in early New York Stock Exchange composite trading. The shares have tumbled 90 percent in the past year, reducing the company's market value to $884 million.

Abandoned Plan

By proposing a sale of common shares, Ambac is reverting to a plan it abandoned in mid-January. The company announced a $1 billion sale Jan. 16, sparking a 70 percent plunge in its stock, and canceled the offering Jan. 18.

Ambac cut its dividend to 1 cent from 21 cents a share and said it will suspend writing guarantees on debt, including mortgage-backed bonds. The combined plans will probably bolster capital enough for an AAA rating, Moody's and S&P said yesterday.

Stock investors were ``expecting something different in terms of some type of a more orchestrated event that looked less like a conventional offering of common stock and more like a carefully crafted infusion from business partners,'' said Colin Glinsman, who oversees about $25 billion as chief investment officer at Oppenheimer Capital in New York.

Credit-default swaps tied to Ambac's AAA rated insurance unit rose 38 basis points to 513 basis points from 475 basis points before the announcement, according to CMA Datavision in London. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

CDO Losses

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

Ambac, its larger competitor MBIA Inc., and the rest of the industry stumbled after expanding beyond municipal insurance to guarantees on collateralized debt obligations that have since tumbled in value. Bond insurers with AAA ratings have guaranteed $2.4 trillion of debt.

The loss of Ambac's top rating would cast doubt on $556 billion of municipal and asset-backed securities insured by the company, forcing some investors to sell the debt and others to reduce their holdings.

Ambac, which pioneered municipal bond insurance in 1971, and the rest of the industry are reeling from their expansion into CDOs, which package pools of securities then split them into pieces with different ratings.

MBIA Affirmed

MBIA retained its top rating after the Armonk, New York- based company raised $3 billion, agreed to stop insuring asset- backed debt for at least six months and said it would separate its municipal and structured finance businesses within five years.

Banks would lose as much as $70 billion if the top-rated bond insurers lose their credit ratings, Oppenheimer & Co. analysts estimated in January. MBIA's ratings were affirmed by Moody's and S&P last week.

Banks bought bond insurance to hedge the risks of CDOs and other asset-backed securities they own.

After Ambac canceled initial plans for a sale, eight banks formed a group to help the company find new ways to raise money. The banks' chances of losses caused investors to speculate they would do more to help Ambac raise money.

``The word we kept hearing was bailout,'' Paul Brennan, who helps manage about $12 billion of municipal bond funds at Nuveen Asset Management in Chicago, said in a Bloomberg Television interview. ``While this is a positive development, they do need more capital, it's not really what we would consider a bailout plan.''

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  • 3 weeks later...

Fitch downgrades FGIC to junk status:

http://www.forbes.com/afxnewslimited/feeds...afx4818996.html

The bond insurer FGIC said on Wednesday that its exposure to mortgage losses exceeded legal risk limits and that it might raise loss reserves because of litigation related to the stricken German bank IKB.

FGIC, the parent of the bond insurer Financial Guaranty Insurance Company, filed a lawsuit this month accusing IKB, which is government-owned, of fraud in providing incomplete information on $1.9 billion of debt that FGIC had agreed to insure.

FGIC also said in a statement that it had a substantially reduced capital and surplus position through Dec. 31. As a result, insured exposures exceeded risk limits required by New York State insurance law, the company, which is based in New York, said.

“This is a bombshell,” said Rob Haines, senior insurance analyst at CreditSights in New York. “They are actually in violation of New York insurance law. If they don’t remediate this, the state has the ability to take control of the company.”

Mr. Haines estimated that FGIC would need to raise about $2 billion to stabilize the company.

Edited by Little Professor
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More bad news for the monolines and a handy table

http://ftalphaville.ft.com/blog/2008/03/27...-trouble-looms/

From AAA to junk... where next?

Oh dear, my favourite ACA Capital in the dog house again:

http://www.reuters.com/article/rbssFinanci...437514420080404

http://www.businessweek.com/magazine/conte...79028480010.htm

Liquidating $5bn of distressed securities. What does that mean? Sounds like they call out a vet who gives the poor securities a lethal injection?

Surely not good for UBS and Banc of America to be named in the same article.

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http://www.bloomberg.com/apps/news?pid=206...&refer=home

[

b]MBIA Loses AAA Insurer Rating From Fitch Over Capital [/b]

Fitch Ratings cut MBIA Inc.'s insurance unit to AA from AAA, saying the bond insurer no longer has enough capital to warrant the top ranking.

MBIA, the world's largest financial guarantor, would need as much as $3.8 billion more in capital to deserve an AAA, New York-based Fitch said today in a report. The outlook is negative, Fitch said.

Fitch issued the new, lower rating even though Armonk, New York-based MBIA asked the ratings company last month to stop assessing its credit worthiness. The two companies disagree over how much capital MBIA needs to absorb losses on the bonds it insures. Moody's Investors Service and Standard & Poor's both affirmed their AAA ratings earlier this year.

``It will be difficult for MBIA to stabilize its credit trend until the company can more effectively limit the downside risk'' from collateralized debt obligations, Fitch said.

The long-term rating of MBIA Inc. was cut to A from AA, Fitch said.

About time, and the world didn't end. A little more pain to be added to the balance sheets of banks, but, hey, the Fed will save them.

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http://www.bloomberg.com/apps/news?pid=206...&refer=home

[

About time, and the world didn't end. A little more pain to be added to the balance sheets of banks, but, hey, the Fed will save them.

its all in the plan. They KNOW its really bad. The only hope is to stretch it out artificially over several years- trade through it.

I expect the sound of : Drip....drip....drip

Edited by Bloo Loo
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Not past the election, if the unempoyment figures are anything to go by. And then we have earnings, or rather the lack of them, which analysts mysteriously have failed downgrade. Keeping the stock market up is preserving the illusion of normalcy, prosperity even as the number of people homeless and on foodstamps increases. I think we are at least a year behind USA but trying to play catch up. I think a lot will depend on how the housing crash plays out. So far we have a really stagnating market with transaction numbers crashing and prices gently slipping.

It is beginning to frighten me, but I don't suit tinfoil at the moment.

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  • 2 weeks later...
  • 4 weeks later...

It's all gone very quiet... I expected more news than we have heard of late, here's some more.

US bond insurer MBIA has posted a loss for the first three months of the year, suffering from its exposure to risky US mortgage-backed debt.

It made a net loss of $2.4bn (£1.2bn) in the period ending 31 March. The year before it made a profit of $198.6m.

http://news.bbc.co.uk/1/hi/business/7396343.stm

Edited by warpig
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