February 29, 2008 / 1:22 PM / 10 years ago

Ambac bailout hits significant snag: report

NEW YORK (Reuters) - An effort to arrange a rescue of trouble bond insurer Ambac Financial Group Inc ABK.N has hit a significant snag over the amount of capital the banks involved would have to inject into the company, CNBC television reported on Friday.

The snag involves a dispute with the ratings agencies whose verdict is crucial to Ambac retaining its triple A debt rating, CNBC said, adding that the agencies are calling for the banks to inject more capital given the structure they are proposing for the business.

Ambac was not immediately available for comment.

CNBC said the deal was still far from dead and that the banks were trying to come up with a new structure which would involve keeping Ambac as a single entity, rather than splitting it into separate units insuring safer municipal bonds and riskier structured bonds.

The deal could happen as early as next week, CNBC said.

Ambac shares were down 8.4 percent in pre-market trading on the news, which also sent U.S. stock futures lower.

Last Friday, a report on CNBC saying that an Ambac rescue was imminent sparked a late rally in stocks.

Reporting by Christian Plumb, editing by Dave Zimmerman

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