by Calculated Risk on 2/22/2008 04:09:00 PM

UPDATE: The Financial Times is reporting that the banks most exposed to a downgrade are discussing injecting more capital into Ambac, and that the plan includes splitting the company.

From the Finanical Times: Banks look to bolster Ambac with $2bn

A group of banks is preparing to inject $2bn to $3bn into the troubled bond insurer Ambac, which is racing against time to come up with fresh capital to avoid a sharp cut in its triple-A credit rating that could trigger wider financial market turmoil.

The money from the banks would be part of a plan to split Ambac’s operations, people involved in the discussions said.

From Reuters: Ambac rescue could be announced Mon or Tues: report

Banks rescuing Ambac ... could announce a plan as soon as Monday or Tuesday, CNBC's Charles Gasparino said on Friday.

The details of the deal are still being worked out and the plan may fall through ...