Ambac Declares Bankruptcy

Turns out it wasn’t just idle threats and sewing-circle chitchat when bond insurer Ambac said a week ago that it may have to enter bankruptcy. The company today announced it had filed for Chapter 11 protection in the U.S. Bankruptcy Court in the southern district of New York.

Ambac said it was unable to raise new capital and failed to “agree to terms with an ad-hoc committee of certain senior debt holders in order to restructure its outstanding debt through a prepackaged bankruptcy proceeding.” The company had said last week that reaching an agreement with its creditors was the only path it saw that would keep it out of bankruptcy.

“As of June 30, 2010, the Company had debt outstanding amounting to $1,622 million,” Ambac said.

The company’s long-term viability had long been questioned, notably by Pershing Square Capital’s Bill Ackman, who said Ambac and other bond insurers might go bankrupt thanks to their exposure to collateralized debt obligations.

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Ambac Declares Bankruptcy