CIFG Assurance Lays Off Staff, Works Toward Settlement

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Bond insurer CIFG Assurance NA last Friday laid off a portion of its staff, as it continues to work with counterparties to settle on its outstanding structured finance exposures.

Approximately 15 of 90 employees were let go. CIFG spokesman Michael Ballinger yesterday confirmed the staff reduction.

Like most other bond insurers, CIFG has seen business virtually disappear as the result of rating downgrades. It wrote just seven deals with a par value of $38.1 million this year, according to Thomson Reuters.

New York insurance superintendent Eric Dinallo said in an interview last month that CIFG and Financial Guaranty Insurance Co. were in binary situations - they must either settle on their structured finance exposures or face regulatory takeover. The state Insurance Department said yesterday it continues to work with CIFG and counterparties to come to an agreement on these deals.

"The department is monitoring the continuing negotiations between CIFG and the counterparties," Michael Moriarty, deputy superintendent for property and capital markets, said in a statement. "The department will weigh the need to take administrative action based on the near-term progress of these discussions."

Last month, the department helped broker deals Syncora Holdings Ltd. made with former parent XL Capital Ltd. and Merrill Lynch & Co. that kept its bond insurer subsidiary, Syncora Guarantee Inc., from becoming insolvent.

Under the agreement, XL Capital infused cash and stock into Syncora Holdings's subsidiaries in return for the commutation of certain agreements. Syncora also paid Merrill Lynch $500 million to terminate eight credit default swaps.

Syncora has since said it is in discussions to commute credit default swap exposures of $52.9 billion with 17 other counterparties. In addition, Ambac Financial Group Inc. announced earlier this month that it had settled a $1.4 billion collateralized debt obligation squared exposure for a cash payment of $850 million.

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