Ambac decides against splitting By Aline van Duyn and Ben White in New York Mon Mar 03 18:30:14 EST 2008 Ambac, the troubled bond insurer, has decided against splitting in two as it completes a $2bn-$3bn (£1bn-£1.5bn) recapitalisation, insiders said. Under a recent proposal, Ambac would have split its operations into a triple A rated municipal bond insurance business and a structured finance business with potentially lower ratings. A lower rating on the structured part of Ambac's business could have forced banks to reduce the value of guarantees on collateralised debt obligations and on derivative trades. There was also the possibility of lawsuits by banks and other groups that bought insurance on CDOs and other structured products. Eight banks, led by Citigroup (NYSE:C) and UBS (NYSE:UBS) , which between them bought the most guarantees from Ambac, are preparing to inject $2bn or more into the bond insurer, which has been racing to come up with fresh capital to avoid a sharp cut in its triple A bond rating. The capital infusion, which is likely to include other investors beside the banks, is expected to be announced within the next few days, people involved in the talks said. The deal is expected to result in Ambac remaining one triple A rated entity. Although Ambac's past guarantees are expected to remain together, its future business is likely to be different. Ambac announced late last week that it had slashed dividends and would stop providing insurance on structured finance deals for at least six months. The moves, similar to those announced by MBIA (NYSE:MBI) , the biggest bond insurer which has been grappling with a lack of investor confidence in its financial strength, are designed to preserve capital. Ambac said halting its structured business for six months would free up $600m in additional capital, for example. Bond insurers have for decades provided triple A stamps of approval to hundreds of billions of dollars of municipal debt. They have broadened their business to also guarantee structured debt, including bonds backed by mortgages. The sharp spikes in mortgage foreclosures this year have resulted in unexpected losses for bond insurers and created holes in their capital base. In spite of efforts by regulators to prevent downgrades of bond insurers, municipal bond yields have risen to historic highs compared with US Treasuries in the past week. This could lead to sharply higher borrowing costs for municipalities across the US.
try again lol. "maybe" overnight they say now. it's got "buy the rumor sell the news" written all over it.
ha ha garbage as expected. Ambac Financial Group, Inc. Announces Commencement of Simultaneous Common Stock and Equity Unit Offerings Wednesday March 5, 1:30 pm ET NEW YORK--(BUSINESS WIRE)--Ambac Financial Group, Inc. (NYSE:ABK - News) (Ambac) today announced that it has commenced a public offering for at least $1 billion worth of shares of its common stock, par value $0.01 per share ("Common Stock"). Ambac has also granted the underwriters in that public offering a 30-day option to purchase from Ambac additional shares of Common Stock to cover over-allotments, if any. ADVERTISEMENT In addition, Ambac announced that it has concurrently commenced a public offering of Equity Units, with a stated amount of $50 per unit for a total stated amount of $500 million. Ambac has also granted the underwriters a 30-day option to purchase additional Equity Units to cover over-allotments, if any. Michael Callen, Chairman and CEO, commented on the offering, saying, âThis capital raise, along with our recent strategic actions, our increased emphasis on risk-adjusted returns over the course of an economic cycle and a six-month suspension of the structured finance business, will strengthen our capital base. We expect to be better positioned to take advantage of the current favorable market environment for credit enhancement.â He added, âIn this offering, we are targeting our core investor base, the long term holders of our stock, who have been loyal to Ambac.â Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., UBS Securities LLC and Banc of America Securities LLC are acting as joint book-running managers, and Keefe, Bruyette & Woods, Inc., BNY Capital Markets, Inc. and KeyBanc Capital Markets Inc. are acting as co-managers, for the common stock offering. Credit Suisse Securities (USA) LLC, Citigroup Global Markets, UBS Securities LLC and Banc of America Securities LLC are also acting as joint book-running managers, and Keefe, Bruyette & Woods, Inc is also acting as a co-manager, for the Equity Units offering. Each Equity Unit will initially consist of a purchase contract and a 1/20 or 5% undivided beneficial ownership interest in a $1,000 principal amount senior note initially due 2021 (a âSenior Noteâ). The purchase contract obligates the holder of an Equity Unit to purchase, and obligates us to sell, in May 2011, a number of newly issued shares of our common stock or, until such time as a sufficient number of shares of common stock are authorized and reserved for issuance upon settlement, shares of our Series A Mandatory Convertible Participating Preferred Stock, par value $1.00 per share. The Senior Notes will be remarketed prior to the contracted stock purchase and the proceeds of the remarketing used to settle the purchase contract. Under certain circumstances, a holder of an Equity Unit may elect to settle a purchase contract prior to 2011. Ambac currently intends to contribute the net proceeds from these offerings (after deducting underwriting discounts and commissions and other offering expenses payable by us) to its insurance company subsidiary Ambac Assurance Corporation in order to increase its capital position, less approximately $100 million, which it intends to retain at Ambac to provide incremental holding company liquidity to pay principal and interest on its indebtedness, to pay its operating expenses and to pay dividends on its capital stock. Proceeds from the settlement of the purchase contracts forming a part of the Equity Units, in May 2011, will be used to repay $142.5 million of the company's debt maturing August 1, 2011. The remaining proceeds will be used for general corporate purposes including future opportunistic repurchases of outstanding debt. Proceeds from the settlement of the purchase contracts will not be used to repurchase common stock. The Common Stock and Equity Units will be sold pursuant to an effective shelf registration statement previously filed with the Securities and Exchange Commission (the "SEC"). Prospectus supplements relating to the offerings of the Common Stock and Equity Units will be filed with the SEC. When available, copies of the prospectus supplements and the accompanying base prospectuses relating to these offerings may be obtained from Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, NY 10004, telephone: (800) 221-1037, facsimile: (212) 325-8057, or Citigroup Global Markets Inc., Brooklyn Army Terminal, 140 58th Street, 8th Floor, Brooklyn, NY 11220, telephone: (718) 765-6732, facsimile: (718) 765-6734. Ambac has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents Ambac has filed with the SEC for more complete information about us and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov . Alternatively, Ambac, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll-free (800) 221-1037.
They are out of bullets. Only hope for them is that bond market/housing mkt turns around before the shorts take them and MBI to zero. We may yet see a government bailout(or forced sellout of muni biz to buffett and co) if/when they get pressured for more capital by the rating agencies.
I agree. the only thing that can get this stocks up is the muni market deciding they will use their services again but I dont think their counting on that anytime soon . the common stock might work as a call with time decay from now on, unless there is some major bull news out. The bulls who think the CDOs wont lose any money made a mistake buying the stock even if they are right, the street wont buy something with so much uncertainty, it will take long before this plays out and these shares wont go up till people know how much they will lose