Day three (or five, counting the weekend) of Elliot Spitzer’s monoline countdown this may be, but bond insurers are still holding out for a market solution.
The WSJ now reports plans from Ambac for an emergency rights issue, offered to current shareholders, to raise $2bn. The rights issue, if it went ahead, could be underwritten by several large banks – notable among them UBS and Citi. Has talk of a split geed Wall Street into action? There’s evidently still some reluctance:
Convincing banks to commit this capital remains a hurdle, according to a person familiar with the matter
On the split, it’s worth noting that profilic monoline shorter Bill Ackman has also been quiet.
Perhaps because, as Brian Yelvington at CreditSights notes, in the event of a split, swaps used to short the bond insurers may succeed to the stronger, muni business, not the structured finance rump. Under industry guidelines, that will happen if 75 per cent or more of the monoline’s business is deemed to be in municipal insurance.