By Jonathan Stempel
NEW YORK, Nov 1 (Reuters) - Ambac Financial Group Inc , once the second-largest U.S. bond insurer, said it may file for bankruptcy protection this year, after missing an interest payment due on some debt.
In a regulatory filing on Monday, Ambac said it has been unable to raise capital to avoid bankruptcy, and remains in talks with senior debtholders about restructuring its debt through a 'prepackaged' bankruptcy filing.
Ambac said if it cannot agree on a prepackaged bankruptcy in the near term, it intends to seek Chapter 11 protection before the end of the year. It said this would cause $1.62 billion of debt to become immediately due and payable.
Ambac, based in New York, previously said it might seek a prepackaged bankruptcy but that its liquidity might not run out until early 2011.
'We are actively working with an ad hoc committee of senior bondholders' toward a prepackaged bankruptcy, Ambac spokesman Peter Poillon said on Monday.
Shares of Ambac tumbled 41 cents, or 49 percent, to 42 cents in premarket trading.
The company said it decided not to make a $2.8 million payment due Nov. 1 on its 7.5 percent bonds maturing in May 2023.
It said if it fails to make the payment within 30 days, it will be in default, and bondholders may demand it repay all principal. The next interest payment on Ambac debt is due Nov. 15.
Ambac and rival MBIA Inc had been the largest bond insurers before losses on risky debt, including mortgages, caused them in 2008 to lose the 'triple-A' credit ratings on which they depended to insure bonds, mostly municipal debt.
ASSET SEIZURE
In March, Ambac's primary regulator, Wisconsin Insurance Commissioner Sean Dilweg, seized $64 billion of the company's worst assets and put them into a segregated account.
On Oct. 8, he filed a rehabilitation plan for that account, which would pay policyholders with a mixture of cash and notes for their claims.
A group of hedge funds is separately suing Ambac to prevent it from siphoning assets from its Ambac Assurance Corp operating unit. The hedge funds say that unit insured more than $1 billion of residential mortgage debt that they own.
Dilweg and a representative for the hedge fund group did not immediately respond to requests for comment.
The bond insurance business cratered after Ambac and MBIA backed away.
Assured Guaranty Ltd, backed by billionaire investor Wilbur Ross, has been effectively the last bond insurer to write new business in the $2.7 trillion municipal bond market. But it lost its triple-A rating from Standard & Poor's on Oct. 25.
(Reporting by Jonathan Stempel; Additional reporting by Chris Sanders; Editing by Derek Caney and John Wallace)
((jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net)) Keywords: AMBAC/ (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Nov 1 (Reuters) - Ambac Financial Group Inc , once the second-largest U.S. bond insurer, said it may file for bankruptcy protection this year, after missing an interest payment due on some debt.
In a regulatory filing on Monday, Ambac said it has been unable to raise capital to avoid bankruptcy, and remains in talks with senior debtholders about restructuring its debt through a 'prepackaged' bankruptcy filing.
Ambac said if it cannot agree on a prepackaged bankruptcy in the near term, it intends to seek Chapter 11 protection before the end of the year. It said this would cause $1.62 billion of debt to become immediately due and payable.
Ambac, based in New York, previously said it might seek a prepackaged bankruptcy but that its liquidity might not run out until early 2011.
'We are actively working with an ad hoc committee of senior bondholders' toward a prepackaged bankruptcy, Ambac spokesman Peter Poillon said on Monday.
Shares of Ambac tumbled 41 cents, or 49 percent, to 42 cents in premarket trading.
The company said it decided not to make a $2.8 million payment due Nov. 1 on its 7.5 percent bonds maturing in May 2023.
It said if it fails to make the payment within 30 days, it will be in default, and bondholders may demand it repay all principal. The next interest payment on Ambac debt is due Nov. 15.
Ambac and rival MBIA Inc had been the largest bond insurers before losses on risky debt, including mortgages, caused them in 2008 to lose the 'triple-A' credit ratings on which they depended to insure bonds, mostly municipal debt.
ASSET SEIZURE
In March, Ambac's primary regulator, Wisconsin Insurance Commissioner Sean Dilweg, seized $64 billion of the company's worst assets and put them into a segregated account.
On Oct. 8, he filed a rehabilitation plan for that account, which would pay policyholders with a mixture of cash and notes for their claims.
A group of hedge funds is separately suing Ambac to prevent it from siphoning assets from its Ambac Assurance Corp operating unit. The hedge funds say that unit insured more than $1 billion of residential mortgage debt that they own.
Dilweg and a representative for the hedge fund group did not immediately respond to requests for comment.
The bond insurance business cratered after Ambac and MBIA backed away.
Assured Guaranty Ltd, backed by billionaire investor Wilbur Ross, has been effectively the last bond insurer to write new business in the $2.7 trillion municipal bond market. But it lost its triple-A rating from Standard & Poor's on Oct. 25.
(Reporting by Jonathan Stempel; Additional reporting by Chris Sanders; Editing by Derek Caney and John Wallace)
((jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net)) Keywords: AMBAC/ (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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