- Leading private equity firms are unlikely to participate
in any recapitalisation of Ambac and MBIA, increasing the pressure on banks
to come up with a rescue package for the bond insurers.
-
- A number of firms, including Bain Capital, Carlyle Group,
Kohlberg Kravis Roberts and TPG, have looked at investing in the cash-strapped
groups, which guarantee the value of everything from municipal bonds to
the most complicated mortgage securities.
-
- These investors have all concluded that the risks are
far too great, according to people familiar with their thinking.
-
- The decision puts more pressure on the banks to provide
rescue financing for Ambac and MBIA. Some large banks and securities firms
could face large writedowns on mortgage securities as well as derivatives
if the US bond insurers lose their Triple-A credit ratings.
-
- A group of eight banks is already considering a plan
to inject capital into Ambac, which needs at least $1bn. Several banks
are also believed to be talking to MBIA, which needs at least $500m. It
is likely that any solutions, which are also a top priority for regulators,
will be crafted for each bond insurer rather than as a general bail-out.
-
- "People who have a logical interest a logical
commercial relationship are engaged, and that's a good sign,"
a US Treasury official said.
-
- The reluctance of big private equity firms to become
involved comes after all have looked closely at the two big monolines.
They have also studied the experience of Warburg Pincus, which committed
$1bn to MBIA in early December at what seemed an attractive price only
to see MBIA's share go into freefall.
-
- Additionally, they have noted that Blackstone, which
has a minority stake in FGIC, has so far declined to put more money into
that troubled bond insurer.
-
- "If we worry that we can get shot from the shadows
by something we can't see coming, it is not for us," says the managing
director in charge of financial service investments for one of the leading
private equity funds. "The financial guarantors pass neither the shadow
test nor the ability to understand test."
-
- The next two to four weeks will be vital for the bond
insurers because the biggest ratings agencies have made it clear they are
very close to cutting their ratings. Fitch, a smaller ratings agency, has
already cut the Triple-A ratings of Ambac and FGIC.
-
- Copyright The Financial Times Limited 2008
-
|
