Ambac could miss interest payment, default on loans

* Says could miss interest payment as soon as Q2 2010

* Says such an event could result in default

* Considers filing bankruptcy, raising capital

By Emily Chasan

NEW YORK, June 8 (BestGrowthStock) – Ambac Financial Group Inc
(ABK.N: ), the bond insurer whose toxic assets were seized by
Wisconsin state regulators in March, said on Tuesday that it
could default on its loan obligations and was still considering
filing a prepackaged bankruptcy.

The company, which has had trouble writing new business
since losing its “triple-A” credit rating in 2008, said in a
U.S. Securities and Exchange Commission filing on Tuesday that
“as early as the second quarter of 2010” it may decide not to
make interest payments on its debt, which could result in event
of a default.

As a result, Ambac said it could consider raising
additional capital, restructuring through a “prepackaged
bankruptcy” or filing a traditional bankruptcy without
agreements from creditors, among other things.

“While management believes that the Company will have
sufficient liquidity to satisfy its needs through the second
quarter of 2011, no guarantee can be given that it will be able
to pay all of its operating expenses and debt service
obligations thereafter, and its liquidity may run out prior to
the second quarter of 2011,” Ambac said in the filing on

Ambac said late on Monday that it has commuted all of its
remaining $16.4 billion of exposure to collateralized debt
obligations of asset-backed securities. The company will pay
$2.6 billion in cash and issue $2 billion of surplus notes, as
part of an agreement with counterparties, it said.

Ambac shares closed up 3.9 percent at $1.07 on the New York
Stock Exchange on Tuesday.

Wisconsin state regulators in March took over roughly $64
billion of Ambac’s worst assets. The insurer, along with rivals
like MBIA Inc (MBI.N: ), has been battling crippling losses from
risky mortgage securities amid the financial crisis.

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(Reporting by Emily Chasan; Editing by Richard Chang)

Ambac could miss interest payment, default on loans