Pershing Square Capital's Ackman Says Stop Ambac, MBIA Dividents

Armen Hareyan's picture

Pershing Square Capital Management's founder Bill Ackman told regulators in a letter today that the two biggest U.S. bond insurers face combined losses of over $23 billion from bonds they've insured, and should be forced to stop paying dividends.

Reuters broke the news about and hour ago.

Yesterday Ambac Financial Group, Inc. declares quarterly dividend and MBIA will have the conference call and earnings reports tomorrow.

In a release to investors Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) yesterday announced that its Board of Directors declared a regular quarterly cash dividend of $0.07 per share of common stock. "The dividend is payable on March 5, 2008 to stockholders of record on February 11, 2008."

However; the founder of hedge fund Pershing Square Capital Management Bill Ackman in a letter to U.S. regulators says "Ambac Financial Group Inc faces losses of $11.61 billion from asset-backed securities and collateralized debt obligations it insured."

"MBIA Inc (MBI.N: Quote, Profile, Research) faces at least $11.63 billion of losses from these obligations, plus additional losses from reinsurance that may no longer be valid," Ackman said in Reuter's news story.

In an open letter to Ambac and MBIA's state regulators, as well as officials at the U.S. Securities and Exchange Commission, Ackman said that it has completed a complete analysis of securities in Ambac's and MBIA's portfolio, based on data from a bank that it believes are reasonable.

But Pershing makes no representations regarding the accuracy and completeness of the data, Ackman wrote.

Ackman said the data and the valuation models that Pershing used were posted publicly at:

Pershing Square, which is short MBIA and Ambac, welcomes suggestions from market participants, Ackman said. The letter refers to the model as the "Open Source Model." (Reporting by Dan Wilchins; Editing by Brian Moss, Leslie Gevirtz)

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