Always in need of a lift as they continue to take structured finance related hits, the bond insurers rallied Friday on news that No. 2 monoline Ambac Financial Group Inc. wiped one of its largest toxic structured finance exposure off of its books as it agreed
to settle an unnamed counterparty's claims against a $1.4 billion collateralized-debt-obligation exposure in exchange for an $850 million cash payment. Ambac shares soared 50.40% on the news to close at $3.79 per share. Ambac in early June announced plans to
launch a separate stable municipal bond-only entity, which has yet to materialize.
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Other bond insurers that surged on the news included the number one monoline MBIA Inc., which jumped 29.34%, to $7.67, and Assured Guaranty Ltd., which gained 9.61% to close at $12.51 per share. PMI Group Inc., the 42% owner of bond insurer FGIC Corp., skyrocketed 31.08% to close at $3.29, despite a move on Thursday by Fitch Ratings to downgrade FGIC's insurer financial strength to CCC junk status on concerns that the company may be seized by the New York State Insurance Department as its capital surplus continues to shrink due to mortgage-related losses.
The broader market did not fare as well as the bond insurers, losing 51.70 points to close at 11,326.32 following a Labor Department report that jobs fell for the seventh straight month in July and the unemployment rate rose 5.7%. - Michael Rudnick
