02:01 NEWS: AMBAC"s Deadline Looms - Today --Sydney Feb 19th. Last Thursday, New York Governor Eliot Spitzer, told Congress that bond insurers had up to five days to resolve their financial problems, or else face government intervention which many assume would mean splitting the insurer up. That time limit expires today. The WSJ is running a story that AMBAC is trying to buy more time by raising $2bn in an equity raising to existing investors. The issues for Ambac in being split are complicated and not at all popular with those banks and hedge funds, who have wagered billions on the demise of the bond insurers, most prevalently via the use of CDS instruments, the cost of which has risen sharply in recent time due to the deterioration of Ambac"s balance sheet. Any attempt at splitting off the best parts of Ambac"s business such as its muni bond business unit, would likely see these profits erode sharply. With so much at stake, many suggest that a rapid resolution of Ambac"s problems and the fate of its triple A rating will take some time to resolve.
Don
