Ambac, the bond insurer which has warned that it faced possible bankruptcy, cheered its shell-shocked shareholders on Wednesday when it announced that its statutory capital remained well above the minimum set by regulators.
The bond insurer said in an SEC filing that its third-quarter statutory capital stood at $856m, well above the minimum $2m requirement set by regulators. Had Ambac breached the minimum — as many in the market had feared – it risked being taken over by regulators. Such a seizure would have triggered termination payouts of $23.1bn, or twice Ambac’s current claims paying resources, CreditSights said in a recent note, citing the company’s quarterly GAAP filing.
In the filing, the company said it had benefited from $311m in reinsurance payments, and more than $5bn derived from commuting four ABS contracts. The bond insurer also said it expected to receive some $440m in tax refunds, which would likely boost its regulatory capital for the fourth quarter.
Ambac’s shares rallied more than 40 per cent after the disclosure, while credit default swaps on the bond insurance unit tightened to 66.5 points upfront compared with 73.5 points upfront on Tuesday, according to data from broker Phoenix Partners.
Related links:
Ambac clings to life – FT Alphaville
The travails of the financial guarantors – FT Alphaville
Bond insurer death watch, CIFG edition – FT Alphaville