Perella to advise NY on bond insurers

Eric Dinallo, New York State’s insurance superintendent, has recruited Perella Weinberg Partners for guidance on the solvency of bond insurers, The Wall Street Journal said. Last week, Mr. Dinallo met with a number of executives from Wall Street firms to consider a bailout of the insurers. MBIA Inc. and Ambac Financial Group Inc. cover some $2.4 trillion in municipal bonds and structured securities — including collateralized debt obligations — which have fallen in value. A possible credit downgrade of the insurers raises fears of how this would impact the value of the securities themselves and whether Wall Street firms and bond investors would also see more losses. By recruiting Perella Weinberg, the state regulator would focus on protecting the policyholders of “monoline” insurers that serve one industry, such as MBIA and Ambac, sources told the Journal. Possible solutions range from cash injections from outside parties to a backup line of credit from Wall Street firms, the insiders said. Although monoline insurers are supposed to cover only one industry, MBIA and Ambac expanded their coverage to riskier securities, such as mortgage-backed assets. CDOs and other related structured debt have plummeted in value and desirability as subprime mortgages went into default.