Ambac doesn’t have a Bear problem
The shoe’s on the other foot at Ambac (ABK). The bond insurer saw its shares rise 10% in early action Tuesday after Ambac said it “has no material exposure to Bear Stearns (BSC) in its financial guaranty and financial services businesses.” The company said Bear, which has agreed to be purchased by JPMorgan Chase (JPM) for $2 a share, “has substantially collateralized its exposure to Ambac under its interest rate and cross-currency swap agreements.”
Ambac, of course, is no stranger to worries about trading partners’ exposure to possible losses. The company raised $1.5 billion last month to bolster its capital cushion, staving off a ratings downgrade that investors and regulators were concerned would lead to a financial system meltdown. Bear’s purchase by JPMorgan, of course, was fueled by the same worries, as the Fed agreed to backstop $30 billion worth of Bear’s assets to entice JPMorgan to do the deal. Ambac’s own brush with meltdown talk has taught the company the value of full disclosure, CEO Michael Callen says in a statement. “We understand that, in times of market stress, it is particularly important to communicate this information with investors and our other constituents,” he says.
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As a bear spokesman, I have to say that this is good news. Any growth in the market is something I like to hear. We all have good days and bad, sometimes the market can be a real bear.
http://sternbears.wordpress.com