Ambac Financial Group Inc. (AMBC) fell to the lowest level since its stock began trading again in May as investors try to estimate its vulnerability to Puerto Rico, whose economy contracted 5 percent this year.
Shares of the New York-based company have declined more than 13 percent this week as investors wary of claims in Detroit look for other municipalities that may struggle to pay their bills. Ambac’s stock is at the lowest price since it re-listed on the Nasdaq Composite Index in May after completing a bankruptcy reorganization. The insurer filed for Chapter 11 protection in November 2010 to reschedule payments on more than $1 billion of bonds and other claims.
The stock sell-off has been mainly driven by “overblown concerns about the company’s exposure to Puerto Rico,” Mark Palmer, an analyst at BTIG LLC in New York, wrote today in a post on BTIG’s website. Ambac had total gross exposure of $2.58 billion to Puerto Rico as of March 31, according to BTIG.
Michael Fitzgerald, a spokesman for Ambac, didn’t immediately return a telephone message and e-mail seeking comment.
The Government Development Bank for Puerto Rico said yesterday it expects to reduce its financing plans and meet with investors. The economy of the commonwealth, which had about $70 billion of public-sector debt as of March 31, contracted 5 percent in the year through July, according to the GDB.
Puerto Rico general-obligation bonds maturing in July 2040 and rated one step above junk traded this week to yield 10.08 percent, the highest this year, data compiled by Bloomberg show. The average yield was almost five percentage points above benchmark munis, twice the level on Aug. 6.
The commonwealth’s debt is suffering in part from higher borrowing costs marketwide after Detroit filed a record bankruptcy filing in July, according to the GDB, which handles the island’s capital-market transactions. The statement comes less than two weeks after the bank said it had closed two short-term loans.
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