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Billionaire investor Wilbur Ross will take a stake of up to a billion dollars in bond insurance company Assured Guaranty [AGO
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Bermuda-based Assured Guaranty has a market capitalization of $1.8 billion.
Ross told CNBC the deal has been in the works for several weeks, and described the investment in Assured Guaranty as "opportunity capital rather than damage-curing capital."
"We've looked at quite a few of the financial guaranty companies, and the reason that we picked Assured for our first point of entry is a pretty straightforward one," he said. "The other ones, by and large, need capital simply to preserve their triple-A rating status. Assured is one of the few that's ranked as a strong, stable triple-A, even without our capital."
He also indicated Assured's relatively conservative approach is consistent with his own.
"I think if you're going to be a true triple-A, you need to behave like one, and not take cowboy-type risks," he said.
The bond insurance sector, particularly major players like MBIA [AGO
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] and Ambac [ABK
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], have been under pressure in recent weeks, as problems in the credit markets has put pressure on their operations. There have been hopes that infusions of outside capital will help the sector revive, which in turn would help loosen tight credit operations.
Ross hinted at additional investments to come.
"We're still in discussions with some of the other people in the industry," he said. "I think we will wind up putting capital, through Assured, into others, either through reinsurance treaties, or through direct purchase."
And he indicated that the industry itself faces transformation.
"We believe that there will be some consolidation within the financial guaranty industry, and that it will end up with fewer, larger companies."
Financier Warren Buffett has also made dramatic moves in bond insurance.
In December, Buffett created his own bond insurer, led by Ajit Jain, the top insurance executive of Buffett's Berkshire Hathaway [BRK
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Buffett's new insurer started insuring municipal bonds in January.
"I guess we are in competition with Warren," Ross told CNBC. "It's easier for him to go from scratch than it would be for us."
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