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Dresdner in to support Ambac with UKpound 25 million [Daily Mail, London].

Feb 27, 2008 Market Outlook

Feb. 26–Germany’s Dresdner Bank has become the latest international financial house to lend its weight to the UKpound 1.5 billion bail-out of ailing US bond insurer Ambac.

Although it will pump in less than UKpound 25 million, Dresdner’s support will give a welcome fillip to the protracted rescue of the monoline insurer.

British banks like Barclays and Royal Bank of Scotland have lent their names to the plan, which could be announced as soon as today.

Ambac and rival monolines like MBIA and FGIC have traditionally made their money by guaranteeing US municipal bond issues.

But Ambac’s decision to lend its seal of approval to bonds backed by US mortgages has proved disastrous, and its gold-plated credit rating is now on the line.

If rating agencies do downgrade Ambac, it could spark another round of multi-billion sub-prime write-downs across the industry, which explains why banks are rushing to sign up to the bail-out.

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