Municipal bond insurer Ambac Financial, a bellwether of the financial crisis back in 2007, when the whole mess was still just the subprime crisis, said today in a filing with the Securities and Exchange Commission that it has chosen not to make a regularly scheduled interest payment on some of its debt. The company also said that it’s trying to negotiate a prepackaged bankruptcy with its creditors and, should that process fail, it plans to file for Chapter 11 protection by year’s end.
Ambac has been getting positively beat up since suffering credit ratings downgrades that started in early 2008. Once downgraded, the firm found itself unable to write bond insurance — which made for rough sailing, since insurance was its main business.
Bankruptcy talk for Ambac has been swirling for some time — Ambac is one of the stocks Bill Ackman famously shorted, and Ackman said as early as 2008 that the bond insurers may go bankrupt as a result of their dealings in collateralized debt obligations.
As the foreclosure crisis continues to hinder the major financial institutions, it looks like one of the initial casualties of the financial crisis may soon be going busto.
mtaylor [at] observer.com | @mbrookstaylor