"It's Beginning to look alot like Christmas..." French-owned bond insurer to get bailout Could represent model for bailouts across the industry By Steve Goldstein, MarketWatch Last Update: 4:54 AM ET Nov 22, 2007Print E-mail Subscribe to RSS Disable Live Quotes LONDON (MarketWatch) -- A pair of banks on Thursday said they will invest about $1.5 billion in French-owned bond insurer CIFG Services in what could prove to be a model for the beleaguered industry -- and provide relief to nervous debt owners. The injection will come from Banque Populaire Group and the Caisse d'Epargne Group, two French cooperative banks that own controlling stakes in CIFG's parent, Natixis (FR:012068: news, chart, profile) , a move that sent shares of the bank up 15%. The companies said the move will allow CIFG to keep its AAA credit rating with the three rating agencies. The banks also said they plan to buy Natixis' stake in CIFG "as quickly as possible." The plan could relief to more than just the French bank. Rating agencies have warned that they will downgrade guarantors that don't have the necessary capital to absorb potential losses in collateralized debt obligations, portfolios that often contain risky mortgage-loan pools. Without the credit enhancement provided by companies like CIFG, Ambac Financial (ABK:AMBAC Inc News, chart, profile, more Last: 24.14-0.65-2.62% 4:02pm 11/21/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: ABK 24.14, -0.65, -2.6%) and MBIA (MBI:MBIA Inc News, chart, profile, more Last: 32.18-2.92-8.32% 4:01pm 11/21/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: MBI 32.18, -2.92, -8.3%) , the rating agencies are more likely to downgrade the CDOs further. And ratings downgrade in turn could decrease the value of those debt pools further and possibly trigger forced selling by investors who cannot hold instruments without AAA ratings. According to a report in The Wall Street Journal, CIFG had direct exposure to residential mortgage-backed securities of $1.9 billion, most of which were backed by subprime mortgages, another $4 billion in CDOs that are backed by subprime mortgage loans and $1.4 billion in "claims-paying resources." Besides CIFG, Fitch Ratings and Moody's Investors Services have said that bond insurers Financial Guaranty Insurance and Security Capital Assurance (SCA:security capital assurance com News, chart, profile, more Last: 4.29-0.46-9.68% 4:01pm 11/21/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: SCA 4.29, -0.46, -9.7%) are most likely to face downgrades, the Journal reported. Privately held FGIC has been in discussions to raise new capitals from its existing investors, which include Blackstone Group (BX:blackstone group l p com unit ltd News, chart, profile, more Last: 21.02-0.49-2.28% 4:00pm 11/21/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: BX 21.02, -0.49, -2.3%) , Cypress Group, PMI Group (PMI:The PMI Group, Inc News, chart, profile, more Last: 10.19-0.96-8.61% 4:02pm 11/21/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: PMI 10.19, -0.96, -8.6%) , General Electric (GE:General Electric Company News, chart, profile, more Last: 37.17-0.87-2.29% 4:00pm 11/21/2007 Delayed quote dataAdd to portfolio Analyst Create alertInsider Discuss Financials Sponsored by: GE 37.17, -0.87, -2.3%) and CIVC Partners, the newspaper reported, citing people familiar with the matter. Steve Goldstein is MarketWatch's London bureau chief. http://www.marketwatch.com/news/sto...284-63D9-4056-A07F-3ACBF593FAC7}&siteid=yhoof