by Calculated Risk on 1/17/2008 09:49:00 AM

PR from Ambac:

Ambac Financial Group, Inc. (NYSE: ABK) (“Ambac”), the parent company of Ambac Assurance Corporation, today commented on a January 16, 2008 announcement by Moody’s Investors Service that it has placed Ambac Assurance Corporation’s ‘Aaa’ insurance financial strength rating on review for possible downgrade.

In view of the uncertainty generated by Moody’s surprising announcement, Ambac is assessing the impact of this action on the Company’s previously announced capital plan.

Translation: You thought 14% was a steep yield for MBIA to pay on the surplus notes (See: "How many other AAA rated companies are raising money at 14%?"). With this possible downgrade, we might not be able to raise capital even at 20%!

Also note, from Merrill this morning, the $3.1B credit valuation adjustments related to hedges with financial guarantors (ACA financial). There is no party in counterparty. (thanks to BR!)