Billionaire buyout investor Wilbur Ross has committed up to $1 billion to Bermuda-based
, one of the few bond insurers to weather the storm enveloping the industry relatively unscathed.
Ross will invest $250 million in Assured's common shares and has committed to buy another $750 million at the company's discretion. The initial investment is subject to regulatory approvals and any subsequent investments will require approval from shareholders, which the company will request at its 2008 annual meeting.
"We are extremely pleased that Wilbur Ross has chosen Assured as his preferred investment vehicle in the financial guaranty industry," Assured President and CEO Dominic Frederico said in a company statement. "This flexible capital source will allow us to continue to capitalize on the significant growth opportunities we see and will support our further expansion in both the direct and reinsurance markets."
Ross' investment comes in contrast to fellow billionaire Warren Buffett, who opened up his own shop to insure municipal debt as trouble in the industry mounted, rather than invest in an existing guarantor.
Assured, which has much less exposure to esoteric structured debt that has sunk rivals
, has seen its stock fare much better during the credit crunch. The stock was trading up 14.1% to $26 Friday morning, not far off its 52-week high of $31.99.
Ross reportedly had been scouring the bond insurer market for a place to park his capital since at least last month. Monoline insurers, which guarantee municipal and corporate debt, have been under fire from ratings agencies that have threatened to downgrade their pristine triple-A ratings unless they improve their capital bases in light of the increasing threat of defaults in the debt market.
Losing their triple-A ratings would impair the monolines' ability to secure new business.
At the heart of the storm has been MBIA, the largest player in the bond insurer market. Standard & Poor's and Moody's Investors Service
both affirmed the company's triple-A rating earlier this week, in light of its efforts to raise $2.6 billion and other steps to shore up its capital base.
Ambac, an insurer Ross was once reportedly
interested in, is the subject of a long-rumored bailout plan in which a consortium of banks including
would pony up to $3 billion.
reported early Friday, however, that those talks hit a significant snag, when ratings agencies demanded more capital from the group.
The plan for Ambac and closely held Financial Guaranty Insurance Co., which has been downgraded by Standard & Poor's, Moody's and Fitch Ratings, would be to split into two companies: one insuring municipal debt, which is relatively safe from default; the other would back structured debt like collateralized debt obligations and other asset-backed paper that has plummeted in value during the credit and housing crises and stirred fears of defaults.
This article was written by a staff member of TheStreet.com.