Ambac posts $3.3 billion loss, but shares surge

By Dan Wilchins

NEW YORK (Reuters) - Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) reported a quarterly loss of $3.3 billion on Tuesday after recording massive credit derivative write-downs, but its shares surged after the bond insurer said it hopes to find much-needed capital "reasonably soon."

Ambac said it also hopes its main insurance unit will regain its top credit rating, which it lost on Friday, from Fitch.

Ambac needs to raise capital after recording a $5.2 billion pre-tax write-down in the fourth quarter for credit derivatives positions linked to assets including mortgages.

It had planned to issue $1 billion of equity or convertible securities to boost capital, but decided last week that market conditions were not good enough.

The company is still looking at other ways to raise capital and has received "a lot of interest," interim Chief Executive Michael Callen said on a conference call.

While the company gave no assurances on the future, the hopes it expressed were enough to boost a stock that has been hammered over the past year.

Shares of Ambac and its top rival, MBIA Inc (MBI.N: Quote, Profile, Research), both jumped. Ambac shares were up more than 34 percent to $8.35 in afternoon trade, while MBIA rose more than 40 percent to $12.15.

Even with Tuesday's gains, Ambac's shares have fallen 90 percent since the beginning of 2007 and more than 65 percent since the end of 2007. MBIA shares have fallen more than 80 percent since the beginning of 2007 and about 35 percent since the end of 2007.