Ambac debt protection costs plunge: CMA
NEW YORK (Reuters) - Debt protection costs on Ambac Financial Group (ABK.N) plunged on Friday, after CNBC reported that eight banks have formed a consortium to seek a rescue plan for ailing bond insurers which will focus on Ambac.
The cost to insure the debt of MBIA Inc (MBI.N), the largest bond insurer, also fell.
Concerns over possible rating cuts from the top "AAA" vital to the insurers' business models has sent their debt protection costs spiralling.
Ambac's debt protection costs plunged on Friday to 6 percent upfront plus 500 basis points annually, down from an upfront cost of 17 percent plus 500 basis points annually, according to data from CMA DataVision.
The cost of protecting MBIA's debt with credit default swaps fell to 13 percent of the amount insured in an upfront payment, plus 500 basis points annually, down from 16 percent upfront plus 500 basis points on Thursday, according to data from CMA DataVision.
Credit protection trades on an upfront basis when investors consider a company distressed.
Citing unnamed sources, CNBC said banks including Citigroup (C.N), UBS (UBSN.VX) (UBS.N) and Wachovia Corp WB.N are working with bond insurers and the New York Insurance Department on a bailout.
(Reporting by Dena Aubin and Karen Brettell)
