Ambac Reaches Settlement Deal with IRS

by San Antonio Attorney

Bond insurer Ambac Financial Group Inc said it has agreed with a $101.9 million settlement deal with the Internal Revenue Service to fix a dispute, a significant development in the company’s effort to leave bankruptcy.

The arrangement with the government agency involves a $1.9 million payment by Ambac, and $100 million payment by Ambac Assurance Corp unit.

It also lessens the company’s carry forwards operating loss by $1.1 billion, which it could otherwise expend to cut back future tax obligation.

Ambac Chief Executive Diana Adams said the settlement was reasonable and fair to the firm and creditors. She also said it will help the company to exit bankruptcy.

The deal still needs to be approved by U.S. Bankruptcy Judge Shelley Chapman, who will consider the motion on April 29.

The former second-biggest bond insurer in the U.S. suffered huge losses after it moved away from guaranteeing municipal bonds and started insuring bonds guaranteed by mortgage loans.

New York-based Ambac sought for Chapter 11 bankruptcy protection in November 2010. In its filing, the company included many groups of bondholders represented by Bank of New York Mellon.  The overall claim against Ambac was $1.6 billion.

Ambac warned investors about the possibility of bankruptcy in October 2010 when the IRS contacted the company.

The company’s reorganization plan was approved last year.

A few weeks ago, the holding company said again that its common stock will lose of its value once the company leaves bankruptcy protection.

In 2009, Ambac’s biggest rival won approval from state insurance regulators to break up into a municipal insurer business and a structured finance unit, which also suffered big mortgage losses.

 

- IRS debt is non-dischargeable in bankruptcy. You can ask a San Antonio Chapter 7 Attorney about all types of debts that survive bankruptcy.

Leave a Comment

Previous post:

Next post: