$1.5B Bailout Gives Hope to Reeling Bond Insurers

By Jim O'Neill,  Newser User
Posted Nov 22, 2007 1:29 PM CST
Douglas Gill, president of Gill Capital Management, Inc. in Dallas, says that investing in bonds is more complicated than stocks.   (KRT Photos)
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(Newser) – A quiet infusion of $1.5 billion from two European banks will help bond insurer CIFG maintain its AAA credit rating, the Wall Street Journal reports. The move keeps at bay a crisis in the bond market that could cost investors $200 billion and might provide a bailout blueprint for other bond insurers struggling in the wake of the subprime mortgage meltdown.

Investor rating services are reviewing CIFG and its competitors because their exposure to billions in subprime mortgage-backed securities. Bond insurers grant AAA ratings on bonds from borrowers as diverse as municipal water districts to the New York Yankees. A downgrade would impact $2.4 trillion in bonds and make it nearly impossible for some companies to access capital.