WL Ross Makes Monoline Bet

WL Ross & Co. has agreed to inject up to $1 billion of capital into Bermuda-based Assured Guaranty Ltd., making a bet that the distressed investment firm can help right the ship of the struggling monolines industry. Through the deal, WL Ross agreed to purchase $250 million common shares of Assured and provided a commitment to acquire up to $750 million of additional common shares at the option of the company. The initial investment is subject to regulatory approvals, while the follow-up purchases would require shareholder approval. The news follows rumors back in January that WL Ross was in talks to acquire Ambac. However, in an interview on financial news channel CNBC Friday morning, Wilbur Ross cited Assured's relative health compared to its competitors, such as Ambac, MBIA, FGIC and other bond insurers. "The others need capital to preserve their triple-A status. Assured is ranked as a strong, stable triple-A even without our capital," Ross said in the CNBC interview. "This is opportunity capital rather than damage-curing capital." However, Ross called the Assured investment "a first point of entry" into the sector, implying that the company could be used to acquire other troubled guarantors or even invest through offering reinsurance to the companies. Ross added that he and Assured management "are still in discussions" with others in the industry. In a statement, Assured's CEO Dominic Frederico seemed to back this sentiment, saying in the announcement, "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." The additional $750 million commitment from WL Ross will be available for one year from the date of the closing of the $250 million investment. The price for subsequent investments will be 97% of the volume weighted average price of the company's common shares for the 15 trading days prior to notice of any subsequent investment. There is a MAC clause, however, that requires Assured to maintain its triple-A rating and overall credit quality. Merrill Lynch served as adviser on the deal.