Banks May Need $143 Billion for Insurer Downgrades (Update4)
(Via The Big Picture)
Has Wilbur Ross lost his mind?
Reports that Ross will invest in the battered bond insurer Ambac have soothed investors. But the deal makes no sense, argues Roddy Boyd.
By Roddy Boyd, writer
January 25 2008: 4:19 PM EST
NEW YORK (Fortune) -- "What on earth is Wilbur Ross thinking?"
That's the question analysts and traders are pondering today as they digest the news - first reported in London's Evening Standard - that billionaire vulture investor Wilbur Ross is considering an investment into deeply-distressed monoline insurer Ambac (ABK). The talks, according to sources the Standard didn't name, were said to be well-advanced.
If Ross were to purchase Ambac in an "as-is" arrangement, he would be buying an enterprise with a staggering $67 billion in CDO exposure, of which $29.1 billion consists of asset-backed CDO's of increasingly dubious credit quality. The company also has $8.4 billion in sub-prime mortgage paper in its portfolio. All told, Ambac's financials show that the insurer has $14.5 billion of claims-paying resources to support a $524 billion guarantee portfolio, figures so unbalanced that the company's attempt to raise $1 billion or more in emergency capital via an equity or convertible offering had to be scrapped last week.
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