District court upholds Ambac securities action settlement approval

By Caroline Salls

Pittsburgh, Dec. 30 - A court order approving Ambac Financial Group, Inc.'s settlement of securities law violation class action lawsuits was affirmed on Dec. 30 by the U.S. District Court for the Southern District of New York in response to an appeal filed by the Police and Fire Retirement System of the City of Detroit.

The district court ruling was filed on Friday in the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, purchasers of Ambac's securities alleged in the lawsuits that the company, some of its directors and officers and some of its underwriters violated federal securities laws by failing to accurately reflect the fair value of the company's exposure on its guarantees in its financial statements.

Ambac said that resolution of the securities actions, which have been pending since 2008, would "significantly aid the debtor in resolving a substantial dispute before confirmation of a plan of reorganization and will provide greater certainty with respect to the debtor's claims pool."

The company said the settlement does not require any further payment from Ambac beyond $2.5 million it deposited in an escrow account before it filed for bankruptcy. Ambac said the settlement will also allow it to avoid the cost of continued litigation.

Ambac also received court approval of an insurer agreement, which is a key part of the settlement.

Under the insurer agreement, the directors and officers insurers will pay a $24.6 million portion of the settlement amount.

According to the Dec. 30 appeal ruling, the police and fire retirement system argued that Ambac did not have the authority to release derivative claims as part of the settlement with the class action plaintiffs.

Judge Naomi Reice Buchwald said in the appeal ruling that the district court found the "argument to be without merit."

"Rather than releasing claims over which it had no authority, Ambac settled claims that were entirely within its province," Buchwald said in the ruling.

Ambac Financial Group, Inc. is a New York-based company that provides financial guarantee insurance for public and structured finance obligations. The company filed for bankruptcy on Nov. 8, 2010, and its Chapter 11 case number is 10-15973.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.