Ross to put up to $1 bln into rival to Ambac, MBIA

By Dan Wilchins and Joseph A. Giannone

NEW YORK (Reuters) - Billionaire Wilbur Ross has agreed to invest up to $1 billion in Assured Guaranty Ltd (AGO.N: Quote, Profile, Research, Stock Buzz), bypassing big bond insurers such as Ambac Financial Group Inc (ABK.N: Quote, Profile, Research, Stock Buzz) in favor of a rival that has largely avoided the credit problems plaguing the industry.

Ross agreed to buy $250 million of common shares of Assured Guaranty and committed to purchase up to $750 million in additional stock at the company's option. Shares of Assured Guaranty, the fifth-largest bond insurer, rose 12.6 percent to close at $25.65 on the New York Stock Exchange.

Assured Guaranty has stayed away from insuring repackaged subprime mortgages and other risky debt since late 2003, while competitors, including Ambac Financial Group Inc (ABK.N: Quote, Profile, Research, Stock Buzz) guaranteed the securities and are expected to face billions of dollars of payouts in coming years.

Those expected payouts could cost Ambac its top debt ratings. Banks, regulators and others are working to raise new capital for Ambac, but those discussions are moving more slowly than hoped, people familiar with the matter said.

Fears of weakness at the biggest bond insurers have cut into their new business. Ross told Reuters that Assured Guaranty can use his capital to win new business from competitors.

"The idea of this capital is to reposition the company, not to simply patch a hole," Ross said in a telephone interview, adding that he was still in conversations with other bond insurers.

That strategy is slightly different from Ross' usual preference to snap up companies that are failing or close to it. Ross made his billions by buying distressed companies in the steel, coal and textile industries and nursing them back to health.

Ross said he may use Assured Guaranty as a platform for buying rival businesses, or reinsuring other insurers' business.