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Bloomberg Ambac Split Leaves Monorail Bond Default Probability (Update3) March 29, 2010, 7:33 PM EDT (Adds attempt to contact Las Vegas Monorail spokesman in the ninth paragraph.) By Christine Richard and Darrell Preston March 29 (Bloomberg) -- Holders of bonds sold by the Las Vegas Monorail Co. likely won’t get their next payment due July 1 because the insurer, Ambac Financial Group Inc., won’t cover them. The monorail, linking the city’s casinos, seeks to reorganize under Chapter 11 bankruptcy and has minimal funds to cover its next scheduled debt disbursement of $9.6 million in July, Wells Fargo, the trustee for the bonds, said in a March 26 announcement. While Ambac guarantees payments of $1.2 billion for the monorail, its obligation has been transferred by Wisconsin insurance regulators to a segregated account that temporarily can’t honor claims, according to the filing. The decision to halt payments on all troubled debt is “a remarkable development,” said Matt Fabian, a senior analyst with Municipal Market Advisors in Westport, Connecticut. “How can you trust any bond insurance policy if regulators take away any security backing that policy?” The halt marks the first time that a regulator has raised the possibility that Ambac, which insures $256 billion of municipal bonds, may be unable to pay current municipal bond insurance policy claims to preserve reserves for future obligations, said Alan Schankel, managing director of Janney Montgomery Scott LLC in Philadelphia. “This will staunch the bleeding and make sure there is money available in the future,” Schankel said, calling the series of transactions a “backdoor reorganization.” State Takeover Wisconsin Insurance Commissioner Sean Dilweg announced on March 26 that his office was taking over Ambac Assurance Corp. liabilities that included policies backing $35 billion in securities, many involving risky mortgages. Dilweg’s office ordered the handover as part of a so-called rehabilitation to keep the company afloat and forestall an “uncontrollable scramble for assets” among policyholders and counterparties. “It therefore seems likely that Ambac will fail to honor claims against the surety bond and the bond insurance policy, which will result in a payment default on the first-tier bonds on July 1, 2010,” according to the monorail trustee’s statement. First Policy Ambac sold the industry’s first insurance policy on municipal debt in 1971, for a $650,000 bond of the Greater Juneau Borough Medical Arts Building in Alaska. For more than three decades bond insurers paid few claims. That track record was shattered when credit markets seized up during the worst credit crunch since the Great Depression. Claims paid by Ambac on bonds backed by souring home loans have threatened to deplete the company’s capital. Gavin Wilkinson, a Wells Fargo spokesman, didn’t immediately return a phone call seeking comment. A message left for Kristen Hansen, spokeswoman for the Las Vegas Monorail, wasn’t immediately returned. “Up until now the assumption was that regulators and bond insurers were going to be very careful to preserve payouts to municipal bondholders,” said James Spiotto, a partner with Chapman & Cutler in Chicago and an expert in municipal bankruptcy. Any policies on which Ambac expects significant claims have been segregated, Ambac spokesman Peter Poillon said in an interview. A complete list of the bond insurer’s obligations taken over by regulators has yet to be released, and may include more guarantees on municipal debt, he said. Negotiate Settlements Ambac also said it plans to negotiate deals with various financial institutions to tear up contracts on all of the collateralized debt obligations backed by mortgage securities it guarantees in exchange for an upfront payment. Moody’s Investors Service lowered Ambac Financial Group to its lowest non-investment rating of C after the announcement and placed its Caa2 rating on Ambac Assurance, the bond insurance unit, under review for a possible upgrade. “These actions are expected to improve the credit standing of Ambac Assurance Corp.’s senior unsecured policyholders by settling the insurer’s most risky exposures, and effectively subordinating policy holdings with outstanding claims,” Moody’s said. --Editors: Michael Weiss, Walid el-Gabry To contact the reporters on this story: Christine Richard in New York at crichard5@bloomberg.net; Darrell Preston in Dallas at dpreston@bloomberg.net. To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net; Sponsored Links |
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| aus der Diskussion: | AMBAC REBOUND- Ratings, Analysen, Charts, News |
| Autor (Datum des Eintrages): | Aktientitan (30.03.10 07:52:52) |
| Beitrag: | 52 von 133 (ID:39241994) |
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