Ambac to stay whole as it waits for infusion

Ambac Financial Group Inc. has decided against splitting into two entities, as it prepares to receive up to $3 billion in cash, according to the Financial Times. A group of eight banks, including Citigroup and UBS, are planning to add at least $2 billion in capital to New York-based Ambac, insiders said to FT. The insurer has been searching high and low for cash to maintain its AAA rating. This bailout could be announced as early as Wednesday, sources said to FT. Citigroup and the rest of the banks in the bailout have bought the most guarantees on collateralized debt obligations and derivative trades, FT said. Under a recent proposal, the bond insurer would have separated its AAA-rated muni bond insurance business from its riskier structured finance business. Were the structured finance portion of the business poorly rated, the banks could have been forced to cut the value of guarantees on collateralized debt obligations and derivative trades, the FT said. Those who purchased insurance on CDOs and other structured products could have also filed suit against the insurer, the FT said. Last Friday, chairman and chief executive Michael Callen said in a statement that the company would cut its quarterly dividend to $0.01 per share from $0.07 per share, and that it would suspend new structured finance business for the next six months to free up $600 million in capital.