Ambac Finalizes Settlement With City Of Detroit On Insured LTGO Bonds

(RTTNews) - Ambac Financial Group Inc. (AMBC) announced Friday that its principal financial guarantee subsidiary, Ambac Assurance Corporation , has finalized a settlement with the City of Detroit regarding its insured limited tax general obligation or "LTGO" bonds.

The LTGO settlement is comprised of new LTGO notes equivalent to 34% of the LTGO allowed claim and a 20% share of any notes remaining in a litigation reserve related to the City's pension bond litigation, which may increase the recovery. The notes in the litigation reserve are a portion of the "B notes" referenced in the City's plan of adjustment.

If the City eventually wins the litigation , which may extend past the bankruptcy plan confirmation, Ambac Assurance's share of the B notes may equate to a recovery of an additional 19% of its allowed claim with respect to the LTGO bonds. If the City loses the litigation, Ambac Assurance will not get any further recovery. If the litigation is settled, Ambac Assurance may get a partial incremental recovery.

As previously indicated, the unlimited tax general obligation or "UTGO" settlement represented 74% of Ambac's allowed claim with respect to the UTGO bonds.

These settlements are related to Ambac Assurance's LTGO and UTGO gross par exposures of $92 million and $78 million, respectively, as of the date of the City's bankruptcy filing.

The company said it expects to continue to pay claims of scheduled principal and interest on the bonds insured by Ambac Assurance.