Ambac causes Wall Street woe

3 March 2008

Wall Street saw US shares dropping by over 200 points as Ambac released bad news, including the possibility that its $3 billion rescue may be in jeopardy.

America's second largest bond insurer announced that it would cut its dividends as well as suspending its structured finance unit for the time being in order to try and raise $600 million in capital.

Ambac is set to cut its quarterly dividend by six cents per share and as well as cutting a cent from its regular divided to take it down to six cents a share.

"These actions will allow us to focus our structured and international businesses on low volatility sectors, where we can generate good risk-adjusted returns," chief executive officer Michael Callen said in a statement.

Royal Bank of Scotland and Barclays are supposed to be leading the rescue efforts but the Times reports that the deal could fall through.

According to The Street website, many of the banks that had aimed to help Ambac could struggle due to the pressure on their own balance sheets.

Rating agency Moody's said that Ambac's capital "exceeds the 'minimum' Aaa standard".

It added: "Ambac is actively pursuing capital strengthening activities that, if successful, are expected to result in the company meeting Moody's current estimate of the Aaa target level."

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