Ambac (ABK) and MBIA (MBI) sank along with the broader market Friday, after the investors in the bond insurers got hit with a bevy of bad news. First, billionaire vulture investor Wilbur Ross said he would sink as much as $1 billion into rival Assured Guaranty (AGO), bolstering the company’s capital position and giving it a chance to benefit from the uncertainty surrounding MBIA and Ambac. Then CNBC reported that talks regarding a $2.5 billion capital-raising effort for Ambac have hit a snag, with ratings agencies apparently demanding a bigger infusion, though the channel stressed that discussions continue. Last but not least, MBIA - which took some $4 billion in mark-to-market losses in its fourth quarter to account for declines in the market value of its derivatives portfolios - said on page 28 of its annual report that it expects further mark-to-market writedowns in January. Approaching midday, Assured Guaranty was up 12% and MBIA and Ambac were each down 5%. But recent history shows that if Ambac is able to work out a deal with its bankers Friday afternoon, shares of it and MBIA - as well as the big market indexes - could reverse course in a big way.

Vulture investor Wilbur Ross is investing as much as $1 billion in Assured Guaranty (AGO), a bond insurer that has sidestepped the worst of the questions looming over rivals Ambac (ABK) and MBIA (MBI). Ross will buy $250 million worth of stock now and could buy $750 million more next year, at Assured’s option. He’ll pay at least $21.76 a share for the stake, which is a dollar below Thursday’s closing price, though he could pay more if Assured shares rise Friday and Monday.

The news comes after Ross said publicly he would consider an investment in the financial guaranty business, leading some observers to conclude he was looking to infuse cash into either Ambac or MBIA, which until recently have been at risk of losing the triple-A ratings that allow them to write new policies. At one point a U.K. newspaper reported Ross was close to a deal with Ambac, leading some people to wonder what Ross was thinking. But that deal never came to pass, and investors continue to await confirmation of a bank-led capital infusion of Ambac that has been reported this week. 

For his part, Ross indicated Friday that he sees a bright future at Assured, which unlike its big rivals isn’t seen as painfully exposed to possible losses on mortgage-related securities like collateralized debt obligations.  “We believe that Assured has an excellent opportunity during this time of uncertainty in the financial markets to provide investors with credit enhancement products in both the public and structured finance markets,” Ross said. “We look forward to a long and profitable association with Assured.”