Moody's: Ambac likely to stay 'Aaa' after offering

NEW YORK (Reuters) - Moody's Investors Service on Wednesday said Ambac Financial Group Inc is likely to retain its "Aaa" insurance financial strength rating if it successfully raises at least $1.5 billion of new capital, together with other capital strengthening and risk management activities.

The credit rating agency is reviewing the ratings of the New York-based bond insurer and its insurance operating units for a possible downgrade.

Moody's said it will "evaluate Ambac's ability to raise capital at reasonable terms in today's difficult market environment as an indication of the company's financial flexibility and overall level of support from investors."

It also called Ambac's decision to halt some structured finance and asset management activities and tighten risk parameters "a very important element in the company's efforts to reduce the volatility in its insured portfolio that has become evident with deterioration in the U.S. residential mortgage market."

(Reporting by Jonathan Stempel; Editing by Jonathan Oatis)