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Fitch Ratings today (Jan.18) cut the rating on Ambac Assurance from AAA, the highest rating, to AA, the third highest. The parent Ambac Financial was dropped from AA to A, the sixth highest rating. Ambac insured the ballpark bonds. The deal was questionable from the beginning, because the bonds yielded a whopping 7.66 percent, 2 to 3 percentage points higher than comparable insured muni bonds. On Thursday, another bond rater, Moody's, put Ambac on watch for a possible ratings cut. Ambac has taken a $3.5 billion write-down, equivalent to two-thirds of its net worth. In theory, when a bond insurer is downgraded, so are the bonds it has insured. Indeed, many insured muni bonds are now trading as if they were not insured. The ballpark bonds were kinky anyway. Merrill Lynch was supposed to sell them; it never did -- holding them for its own account, reaping those juicy yields. Merrill in its last quarter wrote down $15 billion of its mortgage-related debt. The market has pounded the stocks of both Ambac and Merrill this week.

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Anonymous Jan. 18, 2008 @ 1:37 p.m.

Hmmm, have we heard this tune before?


Don Bauder Jan. 18, 2008 @ 2:53 p.m.

Response to post #1: Well, I've been singing this tune for many years, if that's what you mean. It's not only Ambac that is in trouble. Another big insurer, MBIA, also has a portfolio laden with smelly paper. It is likely to get downgraded, too. This puts a pall on the whole concept of insured muni bonds, and also on the muni bond market. And Mayor Jerry Sanders keeps saying that San Diego will return soon to the muni bond market. Does anyone suggest that he read financial news? Best, Don Bauder


Anonymous Jan. 18, 2008 @ 7:25 p.m.

It doesn't mean anything to either the City or the investors who own the bonds. The City is precluded by the State Constitution from defaulting on the bonds. The City cannot escape liability by filing bankruptcy. No matter how bad the City's finances become, the bondholders must be paid even if it means laying off half the City's workforce and stiffing the pension fund. The insurance is worthless and only a fool would pay extra (accept less yield) on an insured bond. Ignoring the State Constitution, if the City of San Diego defaulted on the bonds, it is likely that every city in California would also be in default at the same time. The insurers would not have the assets to pay off the claims. The City's best alternative is to sell the Ball Park to private investors and use the cash to pay down the bonds to an affordable level. The Ball Park is a financial albatross for the City. If the Ball Park was sold to investors for $50 million and the proceeds were used to pay down the bonds the City would substantially reduce its interest costs over the term of the bonds. Not to mention the elimination of maintenance costs which is money flushed down the toilet.


Don Bauder Jan. 19, 2008 @ 9:34 a.m.

Response to second post: There are concerns that bond insurers don't have the money to pay off obligations now. I agree that the ballpark is a financial albatross, but if it were sold to private investors for $50 million, that would be quite a discount, since more than $300 million of public funds went into that facility. The City never should have been stuck with maintenance costs; the council, mayor, and city attorney at that time (late 1990s) were hell-bent on letting the Padres get away with this heist. Best, Don Bauder


Anonymous Jan. 20, 2008 @ 11:29 a.m.

Ah, those kinky ballpark bonds.

They've still got San Diego in bondage. The S&M session has just begun, and we'll all be feeling the pain for many years to come.

It started out innocently enough. Just a tryst with a hunky football team that won our hearts, and our wallets.

The resulting renovations "forced" "poor" John Moores out. "What shall I do?" he asked. His pal McGrory said, let's build a ballpark downtown. I've always wanted one there."

To accomplish this, someone had to pay. "We'll rape the tourists," Roger Hedgecock promised on his radio show. "We won't pay a thing."

To make sure we were all seduced properly, John Moores found some amphetamines snorting, hormone injecting, steroids mainlining ringers to join his gang for one season that got them right to the top just days before the vote.

"Keep the faith" was the slogan.

The faith of the Padres organization, overseen by noted and documented briber of public officials, John Moores, was bolstered by the presence of McGrory on their team to subsequently remove all their obligations and increase all the public obligations.

The TOT that Roger promised would pay for the ballpark -- doesn't.

The hi-tech offices that would give jobs and revenue? Nope. Speculative condos with no infrastructure. And they're crashing...ooops.

So the underlying lies of the bonds upon which their always fallacious valuation and trustworthiness have been exposed over the years, as we all know. It's good to see that the shoddy second rate rating agency that certified these clearly bogus bonds is also now down the tubes. Just like the auditors who signed off on the fraud. But why don't they go to jail when it literally means that San Diegans of the future will die from their negligence. Are we supposed to laugh off and say "ah shucks, it's baseball" to our dwindling police and fire protection, bursting sewers, empty reservoirs?

Why can't we get that money back from Spanos and Moores?

Don, they have our money. They stole our money. What gives?

(yet another sdblogger)


Don Bauder Jan. 20, 2008 @ 4:47 p.m.

Response to post of 4:25 p.m. Hasn't the statute of limitations run out on both of them? You're a lawyer; you should know. Best, Don Bauder


JohnnyVegas Jan. 20, 2008 @ 8:51 p.m.

Too late for Moores, but the Spanos deal is ongoing. At the very least we could throw legal monkey wrenches at Spanos, al a Bruce Henderson type legal challenges.

Seriously though, Spanos has engaged in fraud. He induced the City to upgrade the stadium with the promise to stay 20 years. That was the deal, and he is backing out of it. OK, there is an out clause in the contract and he has to pay back some of the un-amortized costs, but I still think that type of a suit could be proven, and be successful.

Of course it would require the Mayor and City Clowncil have a backbone and some guts, which unfortunately counts out our spineless jellyfish.


Don Bauder Jan. 20, 2008 @ 10:09 p.m.

Response to 8:51 p.m. post: Yeah, but the Chargers arranged a deal with the City that legally gave them the ability to leave this year and also slashed their rent. It was a horrendous deal for the City but great for the Chargers. All the City gave up was the end of the 60,000 seat guarantee and it was slated to end in two years anyway. This was Murphy's deal with Casey Gwinn OKing it. Best, Don Bauder


JohnnyVegas Jan. 20, 2008 @ 4:25 p.m.

I agree with the above blogger.

I say we file a class action against Moores for sure, and maybe Spanos for backing out of the Q deal.

All San Diego City and County residents will be members of the class. It is a novel idea, and could be worth pursuing.

Heck Baltimore is going after Wells Fargo for sub prime loans, which is arguably a much weaker argument.


Don Bauder Jan. 20, 2008 @ 4:46 p.m.

Response to post at 11:29 a.m.: You have probably noticed that if a city holds out against these pro sports racketeers, they will finally give in and finance the deal privately. The Chargers just played the Patriots. The owner, Kraft, tried and tried to get the state and Boston to ante up. Both refused. Finally, he said he was moving the team to Hartford -- a joke: the city is too small and too poor. Finally, he built the stadium himself, although the city and state chipped in on infrastructure. The San Francisco Giants lost five votes before building a private stadium (with public help on infrastructure). The NY Jets/Giants didn't get what they wanted in Manhattan. NY made the Yankees pay most of the money, although there is some monkey business there. Minnesota seems to be holding the line. L.A. has told the NFL there won't be any public money put in the pot. LA stood firm against a subsidized basketball/hockey arena, too. Sacramento and Seattle are holding firm on basketball arenas; they may lose teams, but that's better than losing face. There are other examples. Best, Don Bauder


JohnnyVegas Jan. 21, 2008 @ 8:12 a.m.

Don, these deals are so BAD it boggles the mind. One has to wonder if there was some sort of pay off, not in campaign contributions or things like that, I mean real Randall "Duke" Cunningham pay offs.

A first semester law student at the end of a Contracts I class would be able to write a better deal than the City did with Spanos.

The only way it makes sense is if there were pay offs. I hope that was not the case-but there is just no other reasonable answer or explanation for these one sided, bogus, scam deals.

BTW, if there were some hanky panky going on the contract would be void-and the offending party would be forced to pay.

Thy City needs to stay out of the sports business, and that certainly means no more give aways.


Don Bauder Jan. 21, 2008 @ 9:50 a.m.

Response to post of 8:12 a.m.: I have often wondered if there was a financial quid pro quo. We know there was in the ballpark: former Councilwoman Valerie Stallings raked in gifts, including a tipoff on a hot stock. We know that Golding got great financial support from Moores and Spanos in her short-lived (thankfully) attempt to run for the U.S. Senate. Best, Don Bauder


Anonymous Jan. 22, 2008 @ 3:27 a.m.

Great for a laugh -- Sonics claim in court that they have no economic impact on Seattle. Simultaneously Oklahoma wants to give them $100M as a lure for their economic impact.


(yet another sdblogger)


Don Bauder Jan. 22, 2008 @ 9:39 a.m.

Response to post of 3:27 a.m.: Interesting that Sonics admitted they have no economic impact on Seattle. The leagues and the teams know that they have no impact, but they keep shoveling out the lies that they do. They are still talking about the Super Bowl being a $350 million boost to an economy. It's about one-tenth that, if it is anything at all. It may be a negative for an economy. Best, Don Bauder


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