Feb. 27 (Bloomberg) -- Ambac Financial Group Inc., the bankrupt holding company for a failed bond insurer, filed a new plan to restructure more than $1.25 billion in senior notes after a proposed settlement with the Internal Revenue Service.
The proposed agreement would include a payment from its Ambac Assurance Corp. unit of $100 million; a payment by Ambac Financial of $1.9 million; and Ambac Financial’s agreement to give up a tax credit from losses on credit-default swap contracts to the extent that such losses exceed $3.4 billion, Ambac Financial said in a statement today.
“The IRS has not yet accepted this settlement offer and there are no assurances that such offer will be accepted,” Ambac Financial said in the statement.
According to the new restructuring plan filed in Manhattan bankruptcy court, its terms would allocate $3.65 billion rather than $3.8 billion of the tax losses, known as “net operating losses” to its Ambac Assurance unit. The allocation could be less, depending on certain conditions.
The third restructuring plan updates a second one filed in September, when Ambac Financial said it had an accord with a Wisconsin regulator overseeing the wind-down of its operating unit, Ambac Assurance. That agreement, made after months of negotiations, was about how the parent company, Ambac Financial, would share tax benefits with Ambac Assurance.
Ambac Assurance was the second-largest bond insurer before the 2008 financial crisis, when mounting defaults on mortgages swamped the company with claims. It guaranteed about $256 billion of $1.4 trillion in insured municipal debt, according to data compiled by Bloomberg. Ambac Financial, which relied on dividends from the operating unit, filed for bankruptcy in November 2010, about two years after Ambac Assurance stopped selling new policies in 2008.
The IRS had questioned how Ambac Financial used $7.3 billion in net operating losses, or NOLs, to account for its losses from credit default swaps.
The holding company case is In re Ambac Financial Group Inc., 10-15973, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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