Ambac Financial Group (ABK), once one of the largest U.S. bond insurers, is in talks with senior debtholders to file a pre-packaged bankruptcy, according to a Securities and Exchange Commission filing.
The New York-based company said if it cannot reach agreement on a bankruptcy “in the near term”, it plans to seek Chapter 11 protection from creditors before the end of the year. Such a filing “may be with or without agreement with major creditor groups concerning a plan of reorganization,” the filing said.
Ambac also said its directors decided not to make a regularly scheduled interest payment on Ambac’s 7.5% debentures due May 1, 2023. That interest payment was scheduled to be made today.
According to Ambac’s filing, if the interest is not paid within 30 days of the scheduled interest payment date, “an event of default will occur under the indenture for the 2023 notes”. The occurrence of an event of default would permit the holders of the 2023 notes to accelerate the maturity of the notes.
As of June 30, 2010, Ambac, whose bond-insurance unit hasn’t underwritten new business since mid-2008, had total indebtedness of $1.62 billion. The next scheduled payment of interest on the company’s indebtedness is November 15, 2010.
Shares of Ambac, already a penny stock, lost nearly half their value in Monday’s premarket. At last check, ABK shares were down $0.32, or (39.26%), to $0.50.