Standard and Poor's and its ratings agency peers have caused much
heartache and pain among shareholders of the major bond insurers due to
a mix of downgrades and negative reviews. But on Friday, Aug. 15, shareholders
of the two largest monolines, MBIA Inc. and Ambac Financial Group Inc.,
had S&P to thank for significant stock gains.
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The number one monoline MBIA closed up 8.72%, to $11.22 per share, following a late Thursday S&P report reaffirming its AA financial strength
rating and removing it from negative CreditWatch. Negative CreditWatch
indicates a 50% chance for a ratings downgrade in the next three
months.
S&P in its report said, "MBIA's success in accessing $2.6 billion of
additional claims-paying resources is a strong statement of
management's ability to address the concerns relating to the capital
adequacy of the company."
However, it seems that S&P's report may be a bit late with its
decision, as MBIA raised the $2.6 billion in the beginning of the year
via a mix of equity offerings, a surplus-notes offering and a capital
infusion from Warburg Pincus. S&P maintains a negative outlook on
MBIA, which provides for a one-in-three chance of a downgrade over the
next three years.
Meanwhile, Ambac's stock jumped 24.56% to close at $5.68 per share as S&P took the same action
as it did on MBIA with its AA insurer financial strength rating.
S&P in its report on Ambac pointed out its successful remediation
efforts, which most recently involved the monoline's elimination of one
of its largest toxic structured finance exposure 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.
Not all was bullish on the street Friday. Trash hauler Republic Services Inc. fell 2.33% to close at $33.15 per share as it once again rejected a sweetened takeover offer from competitor Waste Management Inc., saying it undervalues the company.
The
Dow Jones Industrial Average picked up 43.97 points to close at
11,659.90, driven in part by a $1.24 decline in the price of crude oil
per barrel, to $113.77. - Michael Rudnick
