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VIRTUS VIEW 1.22.10 1/22/2010

THE VIRTUS VIEW

Ambac Problems

Here is an article that those who own municipal bonds might find informative. I know this is a bit dated but I had to send it through compliance. Look for next week's e-mail which will be much broader based.

Bloomberg

Ambac May Owe Up to $1.2 Billion Because of Monorail Bankruptcy

January 14, 2010, 02:02 PM EST

By Steven Church

Jan. 14 (Bloomberg) -- Ambac Assurance Corp., the bond insurer, may owe as much as $1.2 billion because of yesterday’s bankruptcy filing by Las Vegas Monorail Co.

Ambac insured at least $451 million in bonds issued in 2000 when Las Vegas Monorail bought the 3.9-mile-long line from MGM Grand-Bally’s Monorail Limited Co. Should Las Vegas Monorail fail to make another payment on those bonds, Ambac would be required to cover the losses, the company said in court papers filed yesterday in U.S. Bankruptcy Court in Las Vegas.

“Ambac estimates that its total exposure under the policy and surety will be approximately $1.163 billion,” the company said in court papers. That amount includes principal and interest exposure claims already paid, the company said.

“Obviously, that has been a transaction that has been on our radar for quite a while,” Ambac Managing Director of Investor Relations Peter Poillon said in an interview today. “We have been evaluating it.”

Poillon declined to say how much money the company may have set aside to cover losses related to the Monorail bonds.

Las Vegas Monorail filed for protection from creditors yesterday under Chapter 11 of the U.S. Bankruptcy Code, which is typically used by companies that expect to keep operating while they cut debt and reorganize.

Ambac asked U.S. Bankruptcy Judge Linda Riegle to dismiss Las Vegas Monorail’s case, arguing that it must be refiled under Chapter 9, which is reserved for government entities. Ambac argued in court papers that Las Vegas Monorail is actually a municipality because it is controlled by the government of Nevada.

The monorail is a not-for-profit corporation created to finance and operate the driverless transportation system that runs from near the Las Vegas Strip to the convention center. Although the monorail’s revenue covers operating expenses, it has never been sufficient to service debt, according to a court filing by Chief Executive Officer Curtis L. Myles III.

The monorail said in its bankruptcy petition that its assets were worth $10 million to $50 million and it had debt of $500 million to $1 billion.

The case is In re Las Vegas Monorail, 10-10464, U.S. Bankruptcy Court, District of Nevada (Las Vegas).

--With assistance from Christine Richard and Bill Rochelle in New York. Editors: Glenn Holdcraft, Charles Carter.

Best Regards,

Brian C. Tillotson

Wealth Manager

Virtus Wealth Management

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