Ambac Unit Keeps Top Ratings After Raising Capital


Ambac Financial Group saved the top ratings on its bond insurance arm on Wednesday, as two rating agencies ended their reviews to downgrade the company in what would have been a crucial blow to its business.

Moody's Investors Service and Standard & Poor's ended their reviews on Ambac's unit, Ambac Assurance Corp, after Ambac on Wednesday succeeded in raising $1.5 billion in new capital.

The two credit rating agencies had put Ambac on review for downgrade from the top "AAA'' level because they viewed its capital as inadequate to support the top rating. The capital concerns reflected losses the insurance arm is expected to take from insuring risky residential mortgage backed debt.

"Ambac's recently completed $1.5 billion capital raise was a critical factor leading to the confirmation of the Aaa insurance financial strength ratings at the company,'' Moody's said in a statement.

Analysts at Standard & Poor's concurred.

"In our view, the additional capital raised, plus the capital-enhancing benefits of Ambac  Assurance's six-month moratorium on new structured finance business production, provides the company with capital in excess of the minimum necessary to support its 'AAA' rating,'' S&P said.

Fitch Ratings also on Wednesday affirmed its "AA'' ratings on Ambac's bond insurance unit, the third highest investment grade. Fitch cut Ambac from "AAA'' on Jan. 18.

Ambac's claims-paying resources are $4 billion to $5 billion below Fitch's target for an "AAA'' rated company, Fitch said. Ambac is unlikely to regain its top rating until it can reestablish momentum in the bond insurance market, Fitch said.