by PJ on 9/02/2008 08:34:00 PM
Showing posts with label shell game. Show all posts
Showing posts with label shell game. Show all posts
Tuesday, September 02, 2008
Ambac Gets Approval for Connie Lee Clone
Looks like the good insurer/bad insurer model is pushing ahead, per Bloomberg:
Ambac Financial Group Inc., the world's second-biggest bond insurer, received approval from Wisconsin regulators to begin offering municipal bond insurance through a newly created insurer called Connie Lee.Essentially, as I understand it, Ambac will move all of its municipal business and employees to Connie Lee, and create Ambac v2.0. The toxic RMBS/CDO stuff will stay back with Ambac; what isn't being discussed by the company (or by regulators) is whether it intends to force counterparties into commutation of its CDS contracts on RMBS/CDO issues once the cloning process is complete.
Ambac rose as much as 15 percent in late trading as Wisconsin regulators, which have jurisdiction over the New York- based company, approved a plan to move $850 million out of Ambac Assurance Corp. into the new business, according to a statement today. Ambac is seeking to obtain an AAA credit rating from Moody's Investors Service and Standard & Poor's for Connie Lee.
The gutted Ambac will be in an interesting position should this go through; will it be well capitalized enough to pay on its claims? Will it focus on putting contracts back for fraud and misrepresentation? Or will it simply tell policyholders they'll get a reduced commutation or get nothing on the guarantee? That'd be a cram-down of an entirely different sort.