Ambac Comments on Standard & Poor's Rating Action
05 Juin 2008 - 8:29PM
Business Wire
Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) issued the
following statement in response to today�s rating actions by
Standard & Poor�s Rating Services (S&P): � � � � We
disagree with and are disappointed by the actions taken by S&P.
Our frustration stems, in part, from the ever-changing criteria for
AAA financial strength ratings. Less than three months ago, S&P
affirmed our AAA rating and removed Ambac from Credit Watch
Negative, citing our successful capital raise and moratorium on new
structured finance business production. At that time, Ambac had
claims paying ability greater than $700 million in excess of
S&P's stated requirements. S&P stated today that it is no
longer basing our rating on claims paying ability, but rather on
the diminished flow of new public finance and structured finance
business we are experiencing. We are in the midst of the most
challenging market environment in our 37-year history, and we are
fully focused on stabilizing our business and regaining our market
position. � Prior to the rating agency announcements this week,
Ambac had been accelerating its efforts to launch a new AAA-rated
financial guarantor utilizing Connie Lee, a fully-licensed
financial guarantee subsidiary of Ambac Assurance Corporation.
Connie Lee would be recapitalized with surplus capital from Ambac
Assurance and, potentially, from one or more third parties. Ambac
Assurance currently has substantial excess capital available under
both Moody's and S&P's capital models. Michael Callen, Chairman
and CEO of Ambac, commented, �We believe there would be strong
demand for a stable AAA financial guarantor focused solely on
guaranteeing the obligations of both municipal and global public
finance. We also believe that, based on its proposed capitalization
and business plan, the new Connie Lee will receive regulatory
approval and will attract stable AAA ratings. Ambac remains
committed to working closely with S&P and other rating agencies
not only to further explain the details of our insured portfolio
and the results of our active portfolio remediation efforts, but
also to explore all strategic options available to us.�
Forward-Looking Statements This release contains statements that
may constitute "forward-looking statements" within the meaning of
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Any or all of management�s forward-looking
statements here or in other publications may turn out to be wrong
and are based on Ambac�s management current belief or opinions.
Ambac�s actual results may vary materially, and there are no
guarantees about the performance of Ambac�s securities. Among
events, risks, uncertainties or factors that could cause actual
results to differ materially are: (1)�changes in the economic,
credit, foreign currency or interest rate environment in the United
States and abroad; (2)�the level of activity within the national
and worldwide credit markets; (3)�competitive conditions and
pricing levels; (4)�legislative and regulatory developments;
(5)�changes in tax laws; (6) changes in our business plan, our
decision to discontinue writing new business in the financial
services area, to significantly reduce new underwriting of
structured finance business and to discontinue all new
underwritings of structured finance business for six months from
March 6, 2008; (7)�the policies and actions of the United States
and other governments; (8)�changes in capital requirements whether
resulting from downgrades in our insured portfolio or changes in
rating agencies� rating criteria or other reasons; (9)�changes in
Ambac�s and/or Ambac Assurance�s credit or financial strength
ratings; (10)�changes in accounting principles or practices
relating to the financial guarantee industry or that may impact
Ambac�s reported financial results; (11)�inadequacy of reserves
established for losses and loss expenses; (12)�default by one or
more of Ambac Assurance�s�portfolio investments, insured issuers,
counterparties or reinsurers; (13)�credit risk throughout our
business, including large single exposures to reinsurers;
(14)�market spreads and pricing on insured collateralized debt
obligations (�CDOs�) and other derivative products insured or
issued by Ambac; (15)�credit risk related to residential mortgage
securities and CDOs; (16)�the risk that holders of debt securities
or counterparties on credit default swaps or other similar
agreements seek to declare events of default or seek judicial
relief or bring claims alleging violation or breach of covenants by
Ambac or one of its subsidiaries; (17)�the risk that our
underwriting and risk management policies and practices do not
anticipate certain risks and/or the magnitude of potential for loss
as a result of unforeseen risks; (18)�the risk of volatility in
income and earnings, including volatility due to the application of
fair value accounting, or FAS 133, to the portion of our credit
enhancement business which is executed in credit derivative form;
(19)�operational risks, including with respect to internal
processes, risk models, systems and employees; (20)�the risk of
decline in market position; (21)�the risk that market risks impact
assets in our investment portfolio; (22)�the risk of credit and
liquidity risk due to unscheduled and unanticipated withdrawals on
investment agreements; (23)�changes in prepayment speeds on insured
asset-backed securities; (24) factors that may influence the amount
of installment premiums paid to Ambac; (25)�the risk that we may be
required to raise additional capital, which could have a dilutive
effect on our outstanding equity capital and/or future earnings;
(26)�our ability or inability to raise additional capital,
including the risks that regulatory or other approvals for any plan
to raise capital are not obtained, or that various conditions to
such a plan, either imposed by third parties or imposed by Ambac or
its Board of Directors, are not satisfied and thus potentially
necessary capital raising transactions do not occur, or the risk
that for other reasons the Company cannot accomplish any
potentially necessary capital raising transactions; (27)�the risk
that Ambac�s holding company structure and certain regulatory and
other constraints, including adverse business performance, affect
Ambac�s ability to pay dividends and make other payments; (28)�the
risk of litigation and regulatory inquiries or investigations, and
the risk of adverse outcomes in connection therewith, which could
have a material adverse effect on our business, operations,
financial position, profitability or cash flows; (29)�changes in
expectations regarding future realization of gross deferred tax
assets; (30) other factors described in the Risk Factors section in
Part I, 1A of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 and in Part II, Item 1A of our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2008, and also
disclosed from time to time by Ambac in its subsequent reports on
Form 10-Q and Form 8-K, which are or will be available on the Ambac
website at www.ambac.com and at the SEC�s website, www.sec.gov; and
(31)�other risks and uncertainties that have not been identified at
this time. Readers are cautioned that forward-looking statements
speak only as of the date they are made and that Ambac does not
undertake to update forward-looking statements to reflect
circumstances or events that arise after the date the statements
are made. You are therefore advised to consult any further
disclosures we make on related subjects in Ambac�s reports to the
SEC. Ambac Financial Group, Inc., headquartered in New York City,
is a holding company whose affiliates provide financial guarantees
and financial services to clients in both the public and private
sectors around the world. Ambac's principal operating subsidiary,
Ambac Assurance Corporation, a guarantor of public finance and
structured finance obligations, has earned triple-A ratings from
Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services; and a double-A rating from Fitch, Inc. Moody's, Standard
& Poor's and Fitch maintain a �negative outlook� while Moody�s
ratings is on review for possible downgrade. Ambac Financial Group,
Inc. common stock is listed on the New York Stock Exchange (ticker
symbol ABK).
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