Bond insurer Security Capital Assurance Ltd. received a new lease on life Wednesday, when it received a capital infusion of $1 billion from XL Capital as well as a bailout from Merrill Lynch & Co. to cancel its credit default swaps in
exchange for a fee. The new money boosted shares of Security Capital, which followed the rising tide of the Dow, which closed up 186.13, or 1.63%, to 11,583.69. The Dow advance was its second consecutive triple-digit gain.
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Shares of Security Capital [SCA] rose 51 cents, or 60.71%, to finish at $1.35. The bond insurer received a bailout from Merrill late Monday, which allowed the insurer to cancel or commute $3.5 billion in credit default swaps in exchange for a $500
million payment. Security also received a $1.78 billion capital infusion from its former parent XL Capital. Credit default swaps are contracts that allow bondholders
to protect their investments, such as structured securities
backed by mortgages, against a default.
Meanwhile, shares of Merrill rose tepidly on the wave Wednesday while Wall Street digested the bank's plan to sell $30.6 billion of toxic securities as a Bank of America Corp. strategist Jeffrey Rosenberg wrote the investment bank is "on the hook if the assets decline by more than 5 cents on
the dollar."
On the downside, shares of video game maker Electronic Arts Inc. [ERTS], which is bidding for Take-Two Interactive Corp., closed down nearly 6% as it reported pro forma revenues of $609 million, short of analyst's expectations. - Gerald Magpily
