Financier Wilbur Ross To Invest US$1bn In Assured Guaranty

U.S. financier, Wilbur Ross, has announced his plan to invest up to US$1bn in bond insurer, Assured Guaranty, in an effort to give the company the opportunity to exploit the difficulties facing large rival companies like MBIA and Ambac.

Ross intends to firstly buy approximately 12% of the Assured, in shares, for US$250 and will commit to buying a further US$750m if Assured requires it in the future.

This new high-stakes investment from a private investor is indicative of the new direction bond insurance is taking. Since the onset of dramatic financial problems, due to mortgage related securities falling through, for big companies such as MBIA and Ambac, high-scale private investors like Warren Buffett and Wilbur Ross have been looking to enter the bond insurance market.

Whilst Ross has invested in bond insurance, Buffett has actually embarked on his own municipal bond insurer and both seem to be focusing on stable municipal bond insurance rather that structured finance which is known to be a more risk based venture and was what saw MBIA and Ambac into their current predicament.

In a statement made last Friday, Ross spoke out on his investment in the company run out of Bermuda. He stated that this was not in any way an effort to rescue a downward moving company, as Assured’s credit rating has been very steady for some time, but was rather was his bid to help a company take a bigger slice of the market pie from bigger companies.

Ross is still interested in furnishing further capital for bond insurers other than Assured, however would take these steps through the company. Ross stated that there is a great demand for capital in the market at this time, however there isn’t as great a supply of investors. According to Ross, Assured could take this investment and actually buy up smaller bond insurers or even purchase municipal bonds that had previously belonged to big-name rivals.

Ambac has yet to broker a deal with banks, which met with the company last Friday, to gain US$3bn to recapitalise the company. Apparently the structure of the deal does not meet ratings agency requirements and therefore must be altered before it can be signed-off on.

According to sources over at Moody’s, Ambac is being highly active in attempting to strengthen the company and attain Moody’s current estimate of a AAA rating level.

MBIA, however, has already gained their AAA rating which has been confirmed by both Moody’s Investors Service and Standard & Poor’s.

Analysts are still expecting confidence in these companies to be quite low for another quarter or two, as it is extremely hard to gauge where the business is headed in the future.

The deal signed by Ross, and his investment vehicle WL Ross & Co, means that he gains a slight discount on the amount of shares he purchased for the US$250m.

Ross will also now have a seat on the company’s ten-person board of directors.

At close of markets in New York, Assured had gone up a hefty US$12.60 per share to US$25.65.

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