NEW YORK (AP) -- Shares of Ambac Financial Group Inc. declined in Thursday morning trading after one analyst warned that the bond insurer's plan to try to sell $1.5 billion in stock isn't enough.
Shares slipped $1.12, or 12.8%, to $7.58 early in the session.
Ambac (ABK) on Wednesday said it hopes selling $1.5 billion in stock will protect its critical "AAA" financial-strength rating, which is needed to book new business, and avoid splitting the company.
For several months, Ambac has been trying to raise more capital in order to maintain both its operations and financial rating. Ratings agencies like Standard & Poor's and Moody's have feared that bond insurers won't come up with enough excess cash to cover a possible jump in claims as problems in the mortgage market continue.
Goldman Sachs analyst James Fotheringham said Ambac needs to raise a much higher $2.5 billion and lowered his price target by $1 to $8.
"Ambac's highly-anticipated capital plan is not enough," Fotheringham wrote in a client note.
Fotheringham also lowered his price target on fellow bond insurer MBIA Inc. (MBI) to $12 from $14.
"We recommend avoiding this space from an investment perspective," Fotheringham added. See Also
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