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Wednesday, January 16, 2008

MBIA, Ambac: Update

S&P Will Re-Examine Bond Insurers After Revising Assumptions: “Standard & Poor's plans to re-examine bond insurers including MBIA Inc. and Ambac Financial Group Inc. to see if the companies hold enough capital to protect their AAA credit ratings.

S&P, which completed a review of the bond insurers in December, will reassess its results based on new assumptions about the housing market announced yesterday, according to Mimi Barker, a spokeswoman for S&P in New York. The credit rating company plans to have the update completed within a week, Barker said.”

Way too little and way too late… and doing it now will only result in more aggressive downgrades on CDO’s and thereby kill MBIA and Ambac faster.

MBIA's Surplus Notes Plunge 12% on Capital Concerns (Update1): “MBIA Inc.'s surplus notes have tumbled as much as 12 percent since they were sold last week on concern that the world's largest bond insurer may need to tap investors for more money.

The AA rated debt fell as low as 88.5 cents on the dollar today, according to bond traders. That's the equivalent of a yield of 18 percent, data compiled by Bloomberg show. The notes were trading at 97.5 cents yesterday, according to Bloomberg data.

MBIA raised $1 billion in the Jan. 11 offering to stave off a reduction in its AAA credit rating. While Fitch Ratings today affirmed the ranking, investors are concerned losses on subprime mortgage securities may grow, Peter Plaut, an analyst at Sanno Point Capital Management in New York, said today in an e-mail.”

Imagine that… the bagholders that bought the MBIA notes only five days ago must be raging right now. Down 12% in five days. If you can’t spot the sucker in the first hour at the table, you are the sucker…

Ambac Financial Group (ABK) is down $8.17 today or 38.65%. After what happened to the MBIA notes, how will Ambac be able to raise that $1 billion it so desperately needs?

See this morning’s post for more on Ambac.