Although we have been skeptical of the bond insurer rescue efforts led by New York state insurance superintendent Eric Dinallo, a report today by Bloomberg claimed progress was being made with the monoline insurer deemed most in need of assistance, Ambac.
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.