After first disclosing a possible bankruptcy five months ago, the parent of Ambac Assurance Corp. made it official.
In a news release Monday, Ambac Financial Group Inc. said it filed for a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.
Ambac said it owed $1.6 billion in debt as of June 30.
The New York-based firm said it will continue to operate as “debtor-in-possession.”
Ambac, which insures mortgage-backed securities, disclosed in June a possible pre-packaged bankruptcy. In March, Wisconsin State Insurance Commissioner Sean Dilweg issued a rehabilitation order against the bond insurer — enabling the state to ensure an orderly runoff of liabilities.
“The company was unable to raise additional capital as an alternative to seeking bankruptcy protection and was also unable to agree to terms with an ad-hoc committee of certain senior debt holders in order to restructure its outstanding debt through a prepackaged bankruptcy proceeding,” the statement said. “However, Ambac has agreed to a non-binding term sheet that will serve as a basis for further negotiations with the ad-hoc committee and that may allow the company to emerge from bankruptcy more expeditiously.”
An interim order is being sought to preserve the company’s $7 billion in net operating losses — which are jeopardized in the event that someone with 5 percent of company equity transfers ownership. Ambac seeks a declaration that it has no tax liability for tax years 2003 through 2008 and that it is entitled to retain the full amount of the tax refunds received for those years.
