Ambac Assists Clients in Lowering Their Interest Costs on Variable Rate Debt
NEW YORK.- Ambac Financial Group, Inc. (NYSE:ABK) (Ambac) today announced that they have successfully worked with their clients to help lower their borrowing costs on auction and variable rate debt in over a 100 transactions. Ambacís objective is twofold: to provide clients with immediate interest rate relief, and to allow them to retain the long-term benefits of the bond insurance they purchased.
Since January, more than $700 million in conversions to Ambac-wrapped fixed-rate deals have been approved including transactions for the University of Cincinnati, Kentucky Utilities Company, Southern Indiana Gas and Electric Company, Cascade Healthcare, Catholic Healthcare West, Renown Health (formerly Washoe Medical Center) and El Camino Hospital. These issuers will save millions of dollars in interest costs per annum as a result of exiting the short-term variable rate markets.
In addition, Ambac has been active in exploring, developing and implementing various amendments, consents and waivers to provide clients temporary or permanent relief from the wide credit spreads. We have approved changes to 75 term conversions that allow the issuers to tap into different investor bases or to temporarily buy their own securities. Transactions totaling over $4 billion have benefited from these conversions, including deals for Palm Beach County School Board, Miami-Dade County School Board, Alaska IDA, Pasadena, City of Babylon, Pacific Gas & Electric Company, St. Anthonyís Medical Center, St. Louis, MO, and Virginia Tech Foundation.
In the Variable Rate Demand Obligations (VRDO) market, Ambac has worked with various banks to amend the liquidity agreements in order to reduce the risk of cancellation of these agreements. These changes provide further assurance to investors that liquidity in their securities will be maintained. We have closed eight such amendments for over $1 billion in securities. As a result, the borrowing costs of Ambac-wrapped VRDOs have decreased by 100-200 basis points. Examples of deals where this has been completed include Utah Water, Intermountain Power Agency and The Medical Center of Central Georgia.
Ambac has also been a leader in working with banks providing direct pay letters of credit as additional security and liquidity for Ambac-insured obligations. These credit facilities are designed as a temporary measure that addresses the current market conditions while leaving the wrapped bond outstanding for its original tenor, often 30 years or more. We have completed two such transactions, have approved several more which are pending closing, and are actively working with commercial banks on programs to offer this product to other Ambac clients. Our recent transaction for USF Financing Corporation significantly lowered that issuerís borrowing costs, saving it millions of dollars this year alone.
In addition to these steps, Ambac has worked on other consents and structural changes to wrapped bonds that offer the flexibility our clients need to ride out these adverse market conditions. These include agreements to change remarketing agents, and consents to effectuate bond exchanges or refundings when in the best interest of our clients.
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