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Financial Guaranty Insurance to Be Taken Over by New York

Financial Guaranty Insurance Co. said it has consented to a proceeding in which New York’s insurance regulator will take over the bond insurer.

Benjamin M. Lawsky, superintendent of the Department of Financial Services, is seeking a court order directing the department to take possession of FGIC’s assets and conduct its business, according to court papers provided by the department.

FGIC consented to the so-called rehabilitation proceeding, and Lawsky will file a plan “that will provide fair and equitable treatment of FGIC’s policyholders and other creditors,” the company said today in a statement.

FGIC Corp., the holding company for Financial Guaranty Insurance Co., filed for bankruptcy in 2010. Financial Guaranty Insurance Co. can’t file for Chapter 11 under federal bankruptcy law and can only be “rehabilitated or liquidated” under state insurance law, according to the court filing by the New York attorney general’s office, which represents the Department of Financial Services. The filing couldn’t immediately be confirmed in court records.

A hearing in state Supreme Court to consider the rehabilitation order is scheduled for June 28, FGIC said.

David Neustadt, a spokesman for the department, declined to comment.

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