S&P says $15 bln may be adequate for bond insurers
NEW YORK (Reuters) - A proposed government effort to inject an eventual $15 billion in new capital into bond insurers could be enough to assure capital adequacy, a Standard & Poor's analyst said on Friday.
New York State Insurance Superintendent Eric Dinallo is in discussion with banks to raise capital for the troubled bond insurers hurt by the subprime crisis.
"The dollars we understand that he's talking about -- $5 billion immediately and $15 billion ultimately -- those are substantial numbers and I think could give us a fair degree of comfort relative to resolving any issues about capital adequacy," S&P analyst Dick Smith said in an interview with Reuters.
However, other issues, including the bond insurers' business viability, would also have to be resolved to preserve their top "AAA" ratings, Smith said.
S&P had put the top "AAA" ratings of Ambac Financial Group's (ABK.N) insurance arm on review for a downgrade on January 18. Such reviews are typically resolved within 90 days, although that could be extended if there is a specific proposal from Dinallo with an expected time frame, Smith said.
"Then we would have to assess what the likelihood would be of it actually coming into place," Smith said.
Ambac shares showed little reaction to the S&P analyst's comments, but MBIA shares gained about 2 percent from their level immediately beforehand, although they remained lower on the day. At about 2:25 p.m., Ambac was up 2.8 percent at $11.64, and MBIA shares were off 2.22 percent at $14.12.
(Reporting by Dena Aubin; Editing by James Dalgleish)
