Friday, January 25, 2008

Follow-up: The bond insurers, a $200bn problem and Wilbur Ross (ABK; MBI; BRK.A)

FT Alphaville has a different take on the hot new boy-band:
Wilbur & The Monolines.

...Come Friday and it seems that everyone wants to be a bond insurer. The FT reports that private equity groups, include TPG, and value investors like Wilbur Ross are considering launching bond insurers in a move that could hamper efforts to help out the struggling incumbents.

This perhaps made more sense than an earlier story in the Standard,[-our post] which put Ross in takeover talks with Ambac.

As Buffett doesn’t appear to be stumping up to rescue anyone (except a small bit of relief for Swiss Re), we need another big name. But if Ross is considering that, he should also consider a sanity check, says Smith.

Ooh, either Wilbur Ross, a savvy investor in distressed assets, has completely lost his judgment with his advancing years, or he has been leaned on by the powers that be to look at this deal in the hopes that it might bring others to the table....MUCH MORE

More Alphaville links here:

...Maybe these comments from BarCap credit analyst Manish Bakhda, sent to clients on Thursday morning, bear repetition:

According to our US insurance analysts (Seth Glasser/Joseph Lesko), the market may have gotten ahead of itself with the major rally that took place yesterday afternoon once the bailout story hit the news.

First, the NYS insurance commissioner is not the lead bank regulator, and cannot compel the banks to make large capital contributions to the monolines. We do not know yet if the Fed is working in unison with the commissioner, however even if that is the case, the Fed will need to be more concerned with the safety and soundness of the banking system, with the impact of the current crisis on monolines a secondary consideration. This could mean that pressure severe enough to force action might never develop.

Second, we believe that it could be very hard for the bank group to agree on a breakdown for contributions. Similar to the super-SIV proposal that ultimately fell apart, banks and dealers have different sizes of monoline exposures, and different counterparty distribution, potentially making some supportive, and others dismissive, of any plan that might near completion.

The bottom line is that we view any potential bailout of the monolines as being in the very early innings, and feel it is by no means a certainty. We believe the market should realize that more detail is needed before a rally akin to yesterday’s is really justified....