Tuesday, July 22, 2008

Wilbur Ross takes a beating on Assured Guaranty (AGO)

From Fortune:
The mortgage mess has claimed another high-profile victim. Investor Wilbur Ross saw more than $100 million go up in smoke after Moody’s said it would review the rating of Assured Guaranty (AGO), the bond insurer Ross bought into earlier this year. The news that Moody’s might yank Assured Guaranty’s triple-A insurer financial strength rating sent shares of the Bermuda-based company plunging 47% in heavy trading Tuesday. Assured said it would work with Moody’s in the review, but suggested it believes any possible downgrade would be unwarranted....

From Reuters:
Assured Guaranty writing new business -president
Bond insurer Assured Guaranty Corp (AGO.N: Quote) continued to write new business after Moody's Investors Service warned it may cut the firm's top "AAA" rating, winning six new competitive U.S. municipal bond deals on Tuesday, company President Michael Schozer told Reuters.

Schozer also said that billionaire investor Wilbur Ross remains committed to the company, even though the potential ratings downgrade and a 40 percent slide in Assured's share price on Tuesday mean the company no longer meets contingencies for the additional investment of $750 million of a $1 billion that Ross had agreed to make in February....

From Bloomberg:

Assured Review by Moody's Isn't Justified, Ross Says

Billionaire investor Wilbur Ross said Assured Guaranty Ltd. doesn't need to raise additional capital and that he plans to talk with Moody's Investors Service about its review of the bond insurer's Aaa rating.

Ross is speaking with investors to allay their concerns, he said in a Bloomberg Television interview in which he also expressed support for Chief Executive Officer Dominic Frederico. In February, Ross committed to invest as much as $1 billion in Assured Guaranty and took a seat on its board.

``There is no real justification for this review process, let alone for an actual downgrade,'' said Ross, 70, who lost $91 million today on his stake in Assured Guaranty as the shares tumbled 40 percent. ``I believe the outlook for the company is extraordinarily good.''

Assured Guaranty is one of two established bond insurers to maintain its top rating as losses in the industry crippled competitors such as former market leaders MBIA Inc. and Ambac Financial Group Inc. Moody's warnings leave Warren Buffett with the only competitor bearing a stable outlook on its top ratings....

From Notable Calls:

...Notablecalls: I suspect AGO may be a buy here around $10 as:

- Deutsche Bank notes Assured Guaranty had $120 million of capital in excess of the triple A requirement.

- Moody's is being very (extremely!) conservative here & may be lagging the cycle badly.

- Wilbur Ross is involved in AGO in a rather big way. If AGO does need more capital, Ross can probably arrange some swiftly to protect his stake. He has put in his own dinero and will not go down without a fight. Plus, AGO has access to $750 mln of additional capital under the agreement.

This sell-off seems overdone.