Ambac Financial Group Inc. said Friday night it will postpone its planned $850 million recapitalization of subsidiary Connie Lee Insurance Co. following Moody's Investors Service decision Thursday to place the Aa3 rating of Ambac Assurance Corp. on review for possible downgrade.

It planned to have Connie Lee write business as muni-only guarantor as early as the fourth quarter, but has now decided to "decelerate" its timeline. Moody's placed Ambac's rating on review for downgrade along with the A2 rating of MBIA Insurance Corp. following an increase in the rating agency's cumulative loss projections for subprime residential mortgage-backed securities exposures.

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