Ambac Agrees to Terms of IRS Settlement
NEW YORK -- April 8, 2013
Ambac Financial Group, Inc. (“Ambac”) has reached an agreement with the United
States of America with respect to the terms of a settlement (the “IRS
Settlement”) that will bring resolution to claims (the “IRS Claims”) filed
against Ambac by the Internal Revenue Service (the “IRS”) and related
litigation. Today, Ambac filed a motion with the United States Bankruptcy
Court for the Southern District of New York (the “Bankruptcy Court”) seeking
approval of the terms of the IRS Settlement (the “Motion”).
Upon consummation, the IRS Settlement will provide for a reduction of the IRS
Claims and for the dismissal of related litigation in exchange for payments by
Ambac, and Ambac Assurance Corporation (“AAC”) and/or the Segregated Account
of Ambac Assurance Corporation (the “Segregated Account”), and will
memorialize compromises among the parties regarding Ambac’s net operating loss
carry-forwards (“NOLs”). Among the material terms of the IRS Settlement, Ambac
shall make a payment to the United States of $1.9 million, and AAC and/or the
Segregated Account will pay the United States $100.0 million. Ambac shall also
pay additional amounts based on payments, if any, received by Ambac from AAC
under the existing intercompany tax sharing agreement as a result of AAC’s
utilization of certain NOLs. In addition, the IRS Settlement will limit
Ambac’s entitlement to claim any portion of the disputed NOLs relating to its
CDS contracts for the tax years covered by the settlement to the extent such
NOLs exceed $3.4 billion, resulting in a net reduction to Ambac’s aggregate
NOLs of approximately $1.1 billion.
According to Diana Adams, Ambac’s President and Chief Executive Officer, “The
IRS Settlement came about through the diligent efforts and support of many
interested parties involved in the case and we believe the terms are fair,
equitable, and in the best interests of Ambac, its creditors, and AAC. This
settlement puts us in a favorable position to emerge from bankruptcy and move
forward with managing our existing business and exploring new business
The Motion is scheduled to be heard by the Bankruptcy Court at a hearing on
April 29, 2013. The entry by the Bankruptcy Court of an order approving the
IRS Settlement pursuant to Bankruptcy Rule 9019 will satisfy one of the
remaining significant conditions precedent to the consummation of Ambac’s
confirmed Fifth Amended Plan of Reorganization (the “Plan”). If the order is
obtained, Ambac and the IRS will then consummate the IRS Settlement. The
effective date of the Plan should occur shortly thereafter.
The complete terms of the IRS Settlement are described in the Motion, which
can be found under “Court Documents” at www.kccllc.net/ambac.
On November 8, 2010, Ambac Financial Group, Inc. (“Ambac”) filed for a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code (“Bankruptcy Code”). The Bankruptcy Court entered an order confirming
Ambac’s plan of reorganization on March 14, 2012, however, Ambac is not
currently able to estimate when it will be able to consummate such
reorganization. Until the plan of reorganization is consummated and Ambac
emerges from bankruptcy, it will continue to operate in the ordinary course of
business as “debtor-in-possession” in accordance with the applicable
provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.
Currently, Ambac’s common stock trades in the over-the-counter market under
ticker symbol ABKFQ. Upon consummation of the plan of reorganization, Ambac’s
existing common stock will be cancelled and extinguished and the holders
thereof will not be entitled to receive, and will not retain, any property or
interest on account of such common stock.
Ambac’s principal operating subsidiary, Ambac Assurance Corporation, is a
guarantor of public finance and structured finance obligations.
Ambac Financial Group, Inc.
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