WL Ross, the distressed investment shop led by US billionaire Wilbur Ross, has joined Warburg Pincus in backing major bond insurers hoping to ward off ratings downgrades. Ross agreed to purchase $250 million (€165 million) of common shares of AAA-rated bond insurer Assured Guaranty and committed to purchase an additional $750 shares at the option of Assured.
“We believe that Assured has an excellent opportunity during this time of uncertainty in the financial markets to provide investors with credit enhancement products in both the public and structured finance markets,” said Ross in a statement.
The purchase price per common share for the initial $250 million investment will be the higher of either $21.97, which is 97 percent of the $22.43 the stock’s closing price on 22 February, or 97 percent of the average of the closing prices on 22 February and 29 February.
WL Ross’s additional $750 million commitment will be available for one year after the closing of the initial investment. The price of future investments will be 97 percent on the volume weighted average of Assured’s common shares for 15 trading days prior.
Assured’s ability to draw on the additional $750 million commitment is reliant upon the company’s maintenance of its triple-A rating and the absence of “material adverse changes”.
Assured is a direct competitor of MBIA which recently sold more than $1 billion in common shares including $800 million to US private equity firm Warburg Pincus. Warburg purchased $500 million in shares in December 2007, and an additional $300 million in shares in February 2008.
WL Ross currently has $7.5 billion under management and closed its fourth fund on $4 billion in January. The firm was acquired by asset management firm Invesco in July 2006 for $375 million.