Ambac Financial Group Inc. said Friday that it is getting closer to its launch of muni-only insurer Everspan Financial Guaranty Corp., according to a document furnished to the Securities and Exchange Commission.
The company has concluded its presentations to the rating agencies and expects to receive final rating resolutions in a "few weeks," it said. In addition, its management team and board of directors is largely in place.
"Ambac is confident of the value proposition of a clean municipal only portfolio," Ambac said.
Ambac Financial Group is scheduled to report fourth-quarter 2008 earnings on Wednesday morning.
Ambac's release comes days after MBIA Inc. announced its own plans to restructure its own business, recapitalizing MBIA Insurance Corp. of Illinois so it can act as a muni-only insurer. Under MBIA's plan, MBIA Illinois - to be called National Public Finance Guarantee Corp. - will get $2.89 billion for reinsuring MBIA Insurance Corp.'s $537 billion book plus an additional $2.09 billion in capital.
Ambac last year had planned to recapitalize Everspan - the old Connie Lee Insurance Co. - and write business as early as October, but delayed its plans when Standard & Poor's placed bond insurer subsidiary Ambac Assurance Corp. on review for downgrade in September.
Both Ambac and MBIA have lobbied in Washington for federal assistance such as capital injections, but Treasury officials told reporters earlier this month the federal government has no plans to provide direct aid to insurers.
Both companies are seeking to convince the market that the muni-only companies will be insulated from the problems at their parent companies.
Ambac, for instance, says Everspan's board will have a majority of independent directors, primarily drawn from the public sector.
It remains unclear how receptive investors will be to buying paper with wraps from these muni-only insurers. Both Standard & Poor's and Moody's Investors Service downgraded MBIA Inc. on Wednesday, noting its new entity will face challenges.
"There continues to be a market for municipal bond insurance, but prospective opportunities in the municipal sector may be narrower than in the past given changing perceptions about municipal risk among buyers, lower confidence in the financial guaranty industry broadly, and a trend toward alternative forms of execution, including the issuance of uninsured paper," said Moody's, which put on review for upgrade MBIA Illinois' Baa1 rating. "For these and other reasons, Moody's noted that any upward rating revision would likely be limited to the single-A range."
