Ambac on thin ice

Ambac’s (ABK) finances continue to look stretched. The bond insurer said late Friday that it and its Ambac Assurance unit “remain in full compliance with the terms and conditions of their $400 million credit facility which remains undrawn.” The comment comes just over a week after Ambac posted a $1.7 billion first-quarter loss, prompting analysts at Goldman Sachs to say they expect Ambac and rival MBIA (MBI) each to have to raise $3.4 billion in new capital.

Ambac said after its first-quarter earnings report that it didn’t expect to have to return to the market for new money any time soon, but the company’s comments Friday show why investors remain concerned. “While our preliminary calculations suggested that there may be a modest non-compliance to the minimum net assets requirement, we can now confirm that we are in compliance by approximately $65 million,” said finance chief Sean Leonard. “The difference relates to an adjustment that properly reflects the full tax benefit associated with our first quarter results.”

Ambac said that while it’s in compliance now, it “will continue its discussions with the lender banks to provide additional flexibility relating to the credit facility.” By all indications, Ambac is going to need every bit of that flexibility.