Ambac Financial: Commissioner denies June 7 payment on surplus notes

By Caroline Salls

Pittsburgh, April 29 - Ambac Financial Group, Inc. said the Wisconsin Commissioner of Insurance denied the requests of Ambac Assurance Corp. and the Segregated Account of Ambac Assurance to pay accrued interest on surplus notes on the next scheduled payment date of June 7.

According to a news release, the commissioner, in his capacity as court-appointed rehabilitator of the segregated account, is seeking approval from the Circuit Court of Dane County, Wis., to amend the account's rehabilitation plan, with a hearing currently scheduled for June 11.

If the motion is approved, the commissioner intends to increase the percentage of the initial cash payments for permitted policy claims to 45% from 25%, effective from the later of July 20, and, if the amended plan is not effective by then, the first payment date following the plan effective date.

The commission also plans pay to policyholders who received 25% interim payments catch-up payments equal to 26.67% of the remaining balance of their claims, including interest, outstanding on the reconciliation date.

If the amended plan is approved, the rehabilitator expects the catch-up payments to be made after the first reconciliation of deferred amounts, and in any event, no sooner than Nov. 20, 2014.

Although the commissioner denied the June 7 interest payment on the surplus notes, Ambac said if the amendments to the plan are approved by the court and the commissioner approves the payment of a portion of the deferred amounts, a redemption of surplus notes, excluding junior surplus notes, would also be required.

A portion of the surplus notes is expected to be redeemed on the deferred payment date, the release said. The amount to be applied against the redemption will be equal to 26.67% of the sum of par on all surplus notes, plus unpaid interest, outstanding as of the reconciliation date.

Ambac Assurance parent Ambac Financial Group is a New York-based company that provides financial guarantee insurance for public and structured finance obligations. The company emerged from bankruptcy on May 1, 2013.

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