``We are aware that the New York State insurance commissioner is trying to attract capital and we'll take that into account to the extent that capital is being raised,'' Ted Collins, the group managing director for global insurance at Moody's said on the conference call. ``Our approach that we've outlined and the time frame being articulated today is independent to whatever process that the regulator is pursuing.''
BAILOUT? - New York Insurance Superintendent watching bond insurers, may intervene
- Thread starter Cdntrader
- Start date
Well maybe they get something off the ground this weekend. Would be good timing with shorts on their heels.
Dinallo's Rescue Plan Focuses on Ambac, People Say
By Erik Holm
Feb. 1 (Bloomberg) -- New York Insurance Superintendent Eric Dinallo is trying to organize a bank-led rescue of Ambac Financial Group Inc. to prevent downgrades of the bond insurer that may roil credit markets, according to two people briefed on the plan.
Dinallo has organized a group of eight banks including Citigroup Inc. and UBS AG to provide financing, said one of the people, who declined to be identified because the details haven't been completed.
``While we cannot discuss specifics, there are a number of developments relating to the bond insurers,'' Dinallo said in a statement today. ``We are continuing to communicate with all parties to help them reach firm deals as soon as possible.'' Ambac spokesman Peter Poillon didn't return calls seeking comment.
Fitch Ratings stripped Ambac, the second-largest bond insurer, of its AAA rating last month, casting doubt on the company's guarantees on about $556 billion of municipal and structured finance debt. Standard & Poor's and Moody's Investors Service Inc. are reviewing their top ratings on the New York- based company. Reductions would lead to asset writedowns for banks that depend on the insurers for coverage of securities.
Ambac climbed $1.51, or 13 percent, to $13.15 at 2:39 p.m. in New York Stock Exchange composite trading. The company has declined more than 80 percent in the past 12 months.
Reinsurance Plan
One of Dinallo's proposals to rescue the company would have banks and securities firms act as reinsurers of bonds and securities that Ambac guarantees, one of the people said. Ambac would pay an upfront fee in return for a promise that the banks would reimburse it if insurance-related losses exceeded an agreed-upon limit, the person said.
Another option would be for banks to provide the bond insurer with capital to help it pay claims. The banks discussing a possible Ambac rescue also include Royal Bank of Scotland Group Plc, Wachovia Corp., Barclays Plc, Societe Generale SA, BNP Paribas SA and Dresdner Bank AG, one of the people said.
``Wachovia recognizes the importance of the monoline insurance industry to the financial services sector,'' said spokeswoman Christy Phillips-Brown. ``We would be supportive of efforts to add stability to the system.''
Ambac scrapped a plan last month to sell $1 billion of shares or convertible notes after the bond insurer's stock plunged 70 percent in two days. The plan provoked a boardroom dispute and led to the departure of Chief Executive Officer Robert Genader.
MBIA
MBIA Inc., the largest bond insurer, this week received $500 million from private-equity firm Warburg Pincus LLC., which has also agreed to backstop another equity raising of at least $500 million. The insurer also sold $1 billion of surplus notes.
``MBIA has already had $2 billion in capital infusions,'' said Jeffrey Kleintop, the chief market strategist who helps manage $163 billion for LPL Financial Services in Boston, in an interview on Bloomberg Television today. ``Ambac has not seen any. The pressure is on to make sure they get what they need before S&P has to take some action.''
MBIA CEO Gary Dunton said yesterday the world's largest bond insurer has more than enough capital to keep its AAA grade and dismissed speculation the Armonk, New York-based company may go bankrupt. MBIA rose 29 cents, or 1.9 percent, to $15.79.
In a meeting with banks and securities firms last week, Dinallo proposed several possibilities for saving insurers, including a line of credit that may be as much as $15 billion, said one of the people familiar with the negotiations. Dinallo has since shifted to pursuing a company-by-company solution, the person said.
`Individual' Solutions
``The likelihood of getting an industry solution is not very high,'' said Merrill Lynch & Co. CEO John Thain during a conference call earlier this week. ``It's quite likely that we get recapitalization or restructuring type of solutions for the individual companies.''
Spokeswomen Christina Pretto of Citigroup, Rohini Pragasam of UBS, Carolyn McAdam of Royal Bank of Scotland and Christelle Maldague of BNP Paribas declined to comment, as did spokesmen Alistair Smith of Barclays and Martin Halusa of Dresdner.
Dinallo's Rescue Plan Focuses on Ambac, People Say
By Erik Holm
Feb. 1 (Bloomberg) -- New York Insurance Superintendent Eric Dinallo is trying to organize a bank-led rescue of Ambac Financial Group Inc. to prevent downgrades of the bond insurer that may roil credit markets, according to two people briefed on the plan.
Dinallo has organized a group of eight banks including Citigroup Inc. and UBS AG to provide financing, said one of the people, who declined to be identified because the details haven't been completed.
``While we cannot discuss specifics, there are a number of developments relating to the bond insurers,'' Dinallo said in a statement today. ``We are continuing to communicate with all parties to help them reach firm deals as soon as possible.'' Ambac spokesman Peter Poillon didn't return calls seeking comment.
Fitch Ratings stripped Ambac, the second-largest bond insurer, of its AAA rating last month, casting doubt on the company's guarantees on about $556 billion of municipal and structured finance debt. Standard & Poor's and Moody's Investors Service Inc. are reviewing their top ratings on the New York- based company. Reductions would lead to asset writedowns for banks that depend on the insurers for coverage of securities.
Ambac climbed $1.51, or 13 percent, to $13.15 at 2:39 p.m. in New York Stock Exchange composite trading. The company has declined more than 80 percent in the past 12 months.
Reinsurance Plan
One of Dinallo's proposals to rescue the company would have banks and securities firms act as reinsurers of bonds and securities that Ambac guarantees, one of the people said. Ambac would pay an upfront fee in return for a promise that the banks would reimburse it if insurance-related losses exceeded an agreed-upon limit, the person said.
Another option would be for banks to provide the bond insurer with capital to help it pay claims. The banks discussing a possible Ambac rescue also include Royal Bank of Scotland Group Plc, Wachovia Corp., Barclays Plc, Societe Generale SA, BNP Paribas SA and Dresdner Bank AG, one of the people said.
``Wachovia recognizes the importance of the monoline insurance industry to the financial services sector,'' said spokeswoman Christy Phillips-Brown. ``We would be supportive of efforts to add stability to the system.''
Ambac scrapped a plan last month to sell $1 billion of shares or convertible notes after the bond insurer's stock plunged 70 percent in two days. The plan provoked a boardroom dispute and led to the departure of Chief Executive Officer Robert Genader.
MBIA
MBIA Inc., the largest bond insurer, this week received $500 million from private-equity firm Warburg Pincus LLC., which has also agreed to backstop another equity raising of at least $500 million. The insurer also sold $1 billion of surplus notes.
``MBIA has already had $2 billion in capital infusions,'' said Jeffrey Kleintop, the chief market strategist who helps manage $163 billion for LPL Financial Services in Boston, in an interview on Bloomberg Television today. ``Ambac has not seen any. The pressure is on to make sure they get what they need before S&P has to take some action.''
MBIA CEO Gary Dunton said yesterday the world's largest bond insurer has more than enough capital to keep its AAA grade and dismissed speculation the Armonk, New York-based company may go bankrupt. MBIA rose 29 cents, or 1.9 percent, to $15.79.
In a meeting with banks and securities firms last week, Dinallo proposed several possibilities for saving insurers, including a line of credit that may be as much as $15 billion, said one of the people familiar with the negotiations. Dinallo has since shifted to pursuing a company-by-company solution, the person said.
`Individual' Solutions
``The likelihood of getting an industry solution is not very high,'' said Merrill Lynch & Co. CEO John Thain during a conference call earlier this week. ``It's quite likely that we get recapitalization or restructuring type of solutions for the individual companies.''
Spokeswomen Christina Pretto of Citigroup, Rohini Pragasam of UBS, Carolyn McAdam of Royal Bank of Scotland and Christelle Maldague of BNP Paribas declined to comment, as did spokesmen Alistair Smith of Barclays and Martin Halusa of Dresdner.
Will falling property values, and the resulting lower income from property taxes, affect the ability of munis to pay for their bonds?
"A spokesman for Ambac declined to comment, but people briefed on the talks said Ambacâs management is involved in the negotiations. The group is planning to reach a deal in âdays, rather than months,â one person involved in the talks said. Once the parties have reached a deal they will present it to the ratings agencies to make sure the plan meets their requirements for a triple-A rating. "
http://www.nytimes.com/2008/02/02/business/02bond.html?_r=2&ref=business&oref=slogin&oref=slogin
Looks like they are getting down to it now. Should be an interesting week.
http://www.nytimes.com/2008/02/02/business/02bond.html?_r=2&ref=business&oref=slogin&oref=slogin
Looks like they are getting down to it now. Should be an interesting week.
Piper Jaffray (nyse: PJC - news - people ) analyst Michael Grasher said it was smart for the banks to come in.
âWe donât know the terms and conditions,â Grasher said, âbut ... it makes a lot of sense for them to come into the process and take a position in Ambac.â
Grasher added that MBIA, by contrast, gave investors a good presentation Thursday, and made a very strong case that they are not approaching insolvency. (See: "MBIA Bounces Back")
âThey have plenty of liquidity, in fact six-years' worth, and if anyone thinks they have solvency issues or are heading to bankruptcy, theyâre going to be disappointed,â Grasher said.
From an investorâs perspective, Grasher noted that Assured Guaranty was trading at book value, while Ambac was trading 20 cents to the dollar and MBIA was trading at 30 cents to the dollar.
âBut once the dust settles youâll start seeing the migration back to book value,â Grasher said, âitâs a matter of pegging losses down over the next six months. Value investors should be taking a very hard look at these companies right now.â
http://www.forbes.com/markets/2008/02/01/bond-insurer-ambac-markets-equity-cx_cg_0201markets24.html
âWe donât know the terms and conditions,â Grasher said, âbut ... it makes a lot of sense for them to come into the process and take a position in Ambac.â
Grasher added that MBIA, by contrast, gave investors a good presentation Thursday, and made a very strong case that they are not approaching insolvency. (See: "MBIA Bounces Back")
âThey have plenty of liquidity, in fact six-years' worth, and if anyone thinks they have solvency issues or are heading to bankruptcy, theyâre going to be disappointed,â Grasher said.
From an investorâs perspective, Grasher noted that Assured Guaranty was trading at book value, while Ambac was trading 20 cents to the dollar and MBIA was trading at 30 cents to the dollar.
âBut once the dust settles youâll start seeing the migration back to book value,â Grasher said, âitâs a matter of pegging losses down over the next six months. Value investors should be taking a very hard look at these companies right now.â
http://www.forbes.com/markets/2008/02/01/bond-insurer-ambac-markets-equity-cx_cg_0201markets24.html
Well they already said the deal is going in front of the rating agencies before its done. So that point is moot.
ABK is sitting pretty here as far as I can tell, with their "feel free to downgrade us" attitude. The banks on the other hand are looking pretty exposed with potential writedowns and SEC investigations over their sales of CDO's and that will probably make them give ABK a sweet deal.
Also Oppenheimer was on Bloomberg saying they had taken a sizeable position in ABK equity in addition to Putnam upping their stake. It woulde be really surprising if ABK doesnt trend higher until/if a deal is announced.
I've never seen anything like this where the whole financial world is waiting on an outcome to an event were the bulls and bears are so polarized. It's going to be some kind of fireworks one way or the other.
Great posts guys. Thanks.
If I may add, I undertstand that the issue is not so much about money but about the business plan the agencies are also requesting...
That's were the real problem is imo.
If I may add, I undertstand that the issue is not so much about money but about the business plan the agencies are also requesting...
That's were the real problem is imo.
another MBIA reinsurer is about to go down
"Moody's reviews RAM Re's ratings for possible downgrade"
http://www.moodys.com/moodys/cust/r...&doc_id=2007000000472991&frameOfRef=corporate
"Moody's reviews RAM Re's ratings for possible downgrade"
http://www.moodys.com/moodys/cust/r...&doc_id=2007000000472991&frameOfRef=corporate