Reality Bites Ambac Longs

The hope that sprung eternal for Ambac shareholders ended rudely today. This entire episode has been downright strange; nobody really believes an Ambac bailout will green light a bid under the market, although they have been trading it that way. Smart people have been playing a dumb game.

Charlie Gasparino will have a bit more free time on his hands now; I hope he uses it constructively. Writing another book, or dining at Rao's, would be more preferable than his final trading hour pronouncements on the state of Ambac.

Charlie says that this might be the chapter behind us if it "occurs", but seems to be waffling quite a bit. And for now the stalemate in the S&P 500 continues.

Are you having fun yet?



Although it was a good day for Ackman...

And Bob O’Brien summed it up pretty well:

The recapitalization plan unveiled Wednesday by Ambac (ABK) doesn’t exactly qualify as a game-changer: the dollar-value of the plan may not be enough to secure its desperately needed Triple-A credit rating, and the plan figures to further dilute one of the more wretched equity issues in the market. Ambac essentially plans to prevail upon the public markets to finance its bailout effort, eyeing $1 billion in an equity offering, and another $500 million from the debt markets.

Those amounts, in total, might be half what analysts figured was needed to sufficiently prop up the balance sheet.In its filing, Ambac officials said the plan is ”targeting our core investor … who have been loyal to Ambac.” Yup - that’s who is getting targeted, alright. And for the record: anybody who has riden this stock down from the May high of $96 to its current price south of $10 is probably operating on some impulse that’s not loyalty. While the public shareholders clearly are disappointed, and the credit markets watch credit default swaps widen some, the one constituency that matters - credit rating agencies - have barely blinked.

Fitch came off as the hard case, saying it didn’t think the recap was going to restore Ambac’s AAA rating. But Fitch was the hard case that already stripped the AAA rating from Ambac’s insurance units. Moody’s is the good cop: it called the recap an ”important” link in the restorative process, and suggested that, while Ambac’s credit was currently under review, a successful execution of the recap would likely prompt the agency to confirm the AAA rating. Standard & Poor’s came off as ambivalent, saying Ambac’s rating stayed on review for a downgrade, but hinted that it might opt to take the credit off watch. Barron’s

AMBAC UNVEILS SOME PLAN
Barron’s

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