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It will take some time and resources to dig into this real deep, but you have to ask yourself what, if any, was the relationship between paulson and ingato.

Tuesday, February 12, 2008
ACA sells CDO business to avert disaster

(FT Alphaville) Monoline ACA isn’t the largest in the world, but its failure would have been extremely painful for banks.

Since it only started out with an A rating, ACA had collateral posting requirements written into its numerous CDS positions. Thus in the event of a downgrade, not only did ACA risk losing new business, but insolvency too, since posting sufficient collateral was impossible.

A big downgrade and two waivers on posting that collateral later and the worst case scenario for ACA might just have been averted.

The monoline is being broken up - selling off its CDO and CLO management businesses. That in turn may raise enough cash for the monoline to meet capital requirements for its actual bond insurance business. And by that, saving Merrill Lynch, for one, $6.6bn.

But will it be enough? ACA, by some counts, has an awful lot of collateral to raise. Before Christmas, the bond insurer needed $1.7bn to post against CDS on CDOs. That was based against super-senior CDO tranches valued at 93 per cent of face. As AIG this week discovered, it’s important to value those super-senior positions correctly. By some estimates, they’re now worth 60 per cent of face. Which would push ACA’s required collateral pledges to $10bn.

Here, anyway, is the ACA statement:

ACA Financial Guaranty Corporation, a subsidiary of ACA Capital Holdings, Inc. (OTC BB: ACAH.PK), announced today that it has entered into a letter of intent with FSI Capital, LLC (”FSI Capital”) to sell its U.S. ABS and Corporate Credit CDO asset management business. FSI Capital, through its affiliates and subsidiaries, manages 17 CDOs totaling approximately $7.5 billion.

The Company also announced today that it has entered into a letter of intent with Resource Financial Fund Management, Inc. (”RFFM”), a wholly-owned subsidiary of Resource America, Inc., and the parent company of Apidos Capital Management, LLC, to sell its U.S. CLO asset management business. Apidos Capital Management has closed 8 CLOs with approximately $2.8 billion of assets under management.

Each of the transactions is subject to final due diligence, the negotiation and execution of a definitive agreement and other standard conditions.

About FSI Capital
FSI Capital is a leading alternative fixed income asset management company focused on financial services, structured finance and real estate. Together with its affiliated companies, FSI Capital has over 40 employees in four offices in the United States. FSI Capital is affiliated with a registered investment adviser.

About Resource America, Inc.
Resource America, Inc. is a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for its own account and for outside investors in the commercial finance, real estate and financial fund management sectors. As of November 30, 2007, the company had assets under management of $17.3 billion. RFFM is a registered investment adviser.