Asset managers holding Ambac-insured bonds advocate for general account policyholders

By Sheri Kasprzak

New York, Feb. 16 – A group of alternative asset managers holding bonds totaling more than $3.3 billion par exposure insured by Ambac Assurance Corp. is advocating for the interests of general account policyholders, a statement from the group’s legal adviser said Tuesday.

Ambac is in the midst of Wisconsin state-law rehabilitation proceedings, which it began in the wake of the 2008-2009 financial crisis. The rehabilitation proceedings culminated in the approval of a plan that divided Ambac’s liabilities into the then-healthy general account liabilities, which primarily consisted of exposure to municipal and similar issuances, and segregated account liabilities, which included exposure to structured finance products.

“Ambac’s general account risk profile has changed dramatically since the segregated account was formed in 2010,” said Lawrence A. Larose, partner with Chadbourne & Parke LLP, the legal adviser representing the policyholder group, in a statement.

“In particular, the general account’s risk on bonds issued by the Commonwealth of Puerto Rico; Chicago, Ill.; and their respective affiliates, to name just a few, presents a significant and growing challenge not anticipated at formation. Ambac’s obligation to our clients extends almost 40 years into the future and must be adequately addressed and provided for in any distribution to creditors of the segregated account.”

Abbe Goldstein, general counsel for Ambac, did not respond to calls for a comment Tuesday.

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