Banks may recapitalize Ambac in bid to save AAA rating

Feb.23, 2008 in Market Outlook

Banks may recapitalize Ambac to save AAA rating

By Alistair Barr, MarketWatch

Last Update: 5:52 PM ET Feb 22, 2008

SAN FRANCISCO (MarketWatch) — A group of eight banks that are major
counterparties to Ambac Financial Group may recapitalize the struggling bond
insurer in a bid to save its crucial AAA rating, two people familiar with the
situation said Friday.

The negotiations have progressed in recent days, the people said, on condition of
anonymity.

The plan could be unveiled Monday or Tuesday, according to one of the people. But
the other person said no firm timetable has been set. Both also noted the plan
isn’t a done deal yet.

Barclays PLC (UK:BARC)(BCS), BNP Paribas (FR:013110), Citigroup Inc. (C), Royal
Bank of Scotland Group (RBS), Societe Generale (FR:013080), UBS AG (UBS),
Wachovia Corp. (WB) and Dresdner Bank, owned by German insurer Allianz
(DE:840400), are the banks involved in the talks, the two people said.

The group recently hired boutique bank Greenhill & Co. (GHL) to help with the
negotiations.

“We have a lot of alternatives. A capital raise has always been an option to
stabilize the rating,” said Vandana Sharma, a spokeswoman for Ambac (ABK), in an
interview. “We’re trying to do the best by all constituents, including
policy-holders, shareholders and counterparties.”

Sharma declined to comment on specific plans.

Ambac shares surged 16% to close at $10.71 Friday.

Other bond insurers also climbed. MBIA Inc. (MBI) gained 2.4% to $12.18 and
Security Capital Assurance (SCA) rose 2.7% to $1.55.

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