Ambac terminates $400 million credit agreement
NEW YORK (Reuters) - Ambac Financial Group Inc (ABK.N) terminated a $400 million credit line because it was not in shareholders' best interest, the bond insurer said on Thursday.
The second largest bond insurer in the world said that as of August 6, it was in violation of certain net asset covenants in the credit agreement and that its management has determined that the terms weren't in the best interest of shareholders and needed to be changed.
The five-year unsecured, committed revolving credit facility was due to expire on July 30, 2012. Ambac added the credit agreement enabled Ambac to borrow for general corporate purposes.
The firm has suffered after guaranteeing billions of risky repackaged subprime mortgage bonds. Analysts expect the company to have to pay out billions on those transactions, weighing on the company's capital base.
Bond insurers historically focused on municipal bonds, but strayed into insuring repackaged mortgages and other debt in a bid to diversify and boost profits.
(Reporting by Juan Lagorio; Editing by Derek Caney)
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