ALBANY, N.Y. — A bailout of bond insurer Ambac Financial Group Inc. (ABK: 11.34, +0.62, +5.78%) is scheduled to be announced as early as Wednesday afternoon, according to a person close to the talks who spoke on the condition of anonymity because the deal wasn’t final.
The deal would split Ambac’s operations into a top-rated municipal bond business and a structured finance unit. Ambac is in trouble because the company wrote guarantees on billions of dollars of questionable structured finance assets.
The person who spoke on condition of anonymity said one of the details to be worked out with New York insurance regulators is when an announcement could be made without disrupting the markets. The announcement could be postponed until next week even if the deal is final. Ambac’s troubles have sent stock prices plunging in recent months.
“A lot of progress has been made” in the last two days, the person said.
A second person familiar with the talks who also spoke on the condition of anonymity said the deal is final and would be announced shortly.
Ambac spokesman Douglas Renfield-Miller wouldn’t comment on whether a deal was imminent, but said Wednesday the company continues to pursue several options.
Ambac has been trying for several months to locate more capital to maintain its top AAA credit rating and continue operating as usual. Its protracted search for capital, and the problems of other bond insurers, has added to the anxiety on Wall Street and also caused problems in the municipal bond market.
The proposal to split Ambac into two divisions might have attracted capital from private equity funds and wealthy investors eager to gain exposure to the generally lucrative municipal bond insurance business. On the other hand, private investors seeking handsome double-digit returns would not have been likely buyers of a new company specializing in risky structured finance insurance.
