Plan of Rehabilitation Filed by Wisconsin Commissioner for Segregated Account of Ambac Assurance Corporation
October 08 2010 - 12:49PM
Business Wire
Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) announced
today that the Wisconsin Office of the Commissioner of Insurance
(“OCI”) has filed its Plan of Rehabilitation for the Segregated
Account of Ambac Assurance Corporation (“the Plan”) in Dane County
Circuit Court in Wisconsin.
The Segregated Account of Ambac Assurance Corporation
(“Segregated Account”) was established on March 24, 2010, at the
direction of the OCI to segregate certain liabilities, primarily
policies related to credit derivatives, residential mortgage-backed
securities and other structured finance transactions. Policies
totaling approximately $57.6 billion of net par outstanding at June
30, 2010, have been allocated to the Segregated Account.
Before the Plan can become effective, it must be confirmed in
Wisconsin courts and OCI has stated that it anticipates that the
court will schedule a hearing shortly to consider confirmation of
the plan. Claims on Segregated Account policies remain subject to a
payment moratorium until the Plan becomes effective. The Plan
provides that, once it is effective, holders of permitted policy
claims will receive 25% of their permitted claims in cash and 75%
in surplus notes with a scheduled maturity of June 7, 2020 and
bearing interest at 5.1%.
The Plan, along with the Plan Disclosure Statement, supporting
exhibits and other information (including schedules of court
hearings) can be found on OCI’s web site at
www.ambacpolicyholders.com.
About Ambac
Ambac Financial Group, Inc., headquartered in New York City, is
a holding company whose affiliates provided financial guarantees
and financial services to clients in both the public and private
sectors around the world. Ambac's principal operating subsidiary,
Ambac Assurance Corporation, a guarantor of public finance and
structured finance obligations, has a Caa2 rating under review for
possible upgrade from Moody's Investors Service, Inc. and an R
(regulatory intervention) financial strength rating from Standard
& Poor's Ratings Services. Ambac Financial Group, Inc. common
stock is listed on the New York Stock Exchange (ticker symbol
ABK).
Forward-Looking
Statements
This release contains statements that may constitute
"forward-looking statements" within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Any or all of management’s forward-looking statements here or in
other publications may turn out to be incorrect and are based on
Ambac management’s current belief or opinions. Ambac’s actual
results may vary materially, and there are no guarantees about the
performance of Ambac’s securities. Among events, risks,
uncertainties or factors that could cause actual results to differ
materially are: (1) Ambac has insufficient capital to finance
its debt service and operating expense requirements beyond the
second quarter of 2011 and may need to seek bankruptcy protection;
(2) the unlikely ability of Ambac Assurance to pay dividends to
Ambac in the near term; (3) the risk that holders of debt
securities or counterparties on credit default swaps or other
similar agreements bring claims alleging that the rehabilitation of
the Segregated Account constitutes an event of default under the
applicable debt indenture or an event of default under the
applicable ISDA contract; (4) adverse events arising from the
Segregated Account Rehabilitation Proceedings, including the
injunctions issued by the Wisconsin rehabilitation court to enjoin
certain adverse actions related to the Segregated Account being
successfully challenged as not enforceable; (5) litigation arising
from the Segregated Account Rehabilitation Proceedings; (6) any
changes to the Proposed Settlement, or the failure to consummate
the Proposed Settlement; (7) decisions made by the rehabilitator
for the benefit of policyholders may result in material adverse
consequences for Ambac’s securityholders; (8) potential of
rehabilitation proceedings against Ambac Assurance, with resulting
adverse impacts; (9) the risk that reinsurers may dispute
amounts owed us under our reinsurance agreements; (10) possible
delisting of Ambac’s common shares from the NYSE; (11) the
risk that market risks impact assets in our investment portfolio or
the value of our assets posted as collateral in respect of
investment agreements and interest rate swap and currency swap
transactions; (12) risks which impact assets in Ambac Assurance’s
investment portfolio; (13) risks relating to determination of
amount of impairments taken on investments; (14) credit and
liquidity risks due to unscheduled and unanticipated withdrawals on
investment agreements; (15) market spreads and pricing on
insured CDOs and other derivative products insured or issued by
Ambac; (16) inadequacy of reserves established for losses and
loss expenses, including our inability to realize the remediation
recoveries included in our reserves; (17) Ambac’s financial
position and the Segregated Account Rehabilitation Proceedings may
prompt departures of key employees; (18) the risk of
litigation and regulatory inquiries or investigations, and the risk
of adverse outcomes in connection therewith, which could have a
material adverse effect on our business, operations, financial
position, profitability or cash flows; (19) difficult economic
conditions, which may not improve in the near future, and adverse
changes in the economic, credit, foreign currency or interest rate
environment in the United States and abroad; (20) the actions of
the U. S. Government, Federal Reserve and other government and
regulatory bodies to stabilize the financial markets; (21) likely
unavailability of adequate capital support and liquidity;
(22) credit risk throughout our business, including credit
risk related to residential mortgage-backed securities and
collateralized debt obligations (“CDOs”) and large single exposures
to reinsurers; (23) default by one or more of Ambac
Assurance’s portfolio investments, insured issuers,
counterparties or reinsurers; (24) the risk that our risk
management policies and practices do not anticipate certain risks
and/or the magnitude of potential for loss as a result of
unforeseen risks; (25) factors that may influence the amount of
installment premiums paid to Ambac, including the imposition of the
payment moratorium with respect to claims payments as a result of
Segregated Account Rehabilitation Proceedings; (26) changes in
prevailing interest rates; (27) the risk of volatility in
income and earnings, including volatility due to the application of
fair value accounting, required under the relevant derivative
accounting guidance, to the portion of our credit enhancement
business which is executed in credit derivative form, and due to
the adoption of the new financial guarantee insurance accounting
standard effective January 1, 2009, which, among other things,
introduces volatility in the recognition of premium earnings and
losses; (28) changes in accounting principles or practices
that may impact Ambac’s reported financial results;
(29) legislative and regulatory developments;
(30) operational risks, including with respect to internal
processes, risk models, systems and employees; (31) changes in tax
laws and other tax-related risks; (32) other factors described in
the Risk Factors section in Part I, Item 1A of Ambac’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 and
also disclosed from time to time by Ambac in its subsequent reports
on Form 10-Q and Form 8-K, which are available on the Ambac website
at www.ambac.com and at the SEC’s website, www.sec.gov; and
(33) other risks and uncertainties that have not been
identified at this time. Readers are cautioned that forward-looking
statements speak only as of the date they are made and that Ambac
does not undertake to update forward-looking statements to reflect
circumstances or events that arise after the date the statements
are made. You are therefore advised to consult any further
disclosures we make on related subjects in Ambac’s reports to the
SEC.
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