Thursday, January 24, 2008

Billionaire to rescue of crisis-hit US insurer (ABK)

If you are running a mismanaged monoline insurer you DO NOT want this man pulling into the parking lot. His presence means the jig's up and you're buffing that résumé. He is a VERY serious dude.
Wilbur Ross
Bond play: Ross is 'keen to take advantage of a coming wave of consolidation'

From The Evening Standard:

Billionaire vulture fund operator Wilbur Ross is in takeover talks with Ambac, the troubled bond insurer whose recent financial crisis was a major factor in this week's dramatic US interest rate cut.

The Evening Standard has learned that a deal for the stricken $14 billion (£7.2 billion) US company, which insures bonds issued by a host of British businesses including Arsenal Football Club, Punch Taverns and the backers of Tube infrastructure projects, could come within the next two weeks.

Insiders said the negotiations are serious and progressing well. News of the talks came after last night's dramatic intervention by US regulators to rescue the stricken bond insurance market.

Wall Street banks are in talks with New York's insurance superintendent, Eric Dinallo, about raising capital to shore up the likes of Ambac, which have been badly hit by the collapse of the credit market, which they insure.

If bond insurers collapse, trillions of dollars of the debt they underwrite would have to be downgraded. The banks holding the debt would be hit by even bigger losses and companies issuing the debt would face higher repayment costs.

The bond insurance crisis is being talked of as the next tidal wave in the global credit crunch, following the sub-prime mortgage market collapses. News of the regulatory intervention triggered a big turnaround on Wall Street, as a 326-point deficit on the Dowswung to a 299-point gain by the close.

Ross declined to comment on specific potential deals but said he was keen to buy a bond insurer to take advantage of a coming wave of consolidation....MORE