Am­bac dis­cussing $7.3b loss al­lo­ca­tion with cred­i­tors, reg­u­la­tors

The Pak Banker - - Company & Boss News -

NEW YORK: An Am­bac Fi­nan­cial Group Inc. lawyer told a bank­ruptcy judge that the hold­ing com­pany for a failed bond in­surer is dis­cussing with cred­i­tors and reg­u­la­tors how to al­lo­cate $7.3 bil­lion in net op­er­at­ing losses.

Sep­a­rately, Daniel Filor, a lawyer for the U.S. at­tor­ney's of­fice, told the judge that the govern­ment be­lieves a dis­pute over Am­bac Fi­nan­cial's tax re­fund should be moved from bank­ruptcy court in New York to fed­eral district court.

Am­bac's prin­ci­pal in­surance unit, Am­bac As­sur­ance Corp., was taken over by reg­u­la­tors, where the of­fice of Wis­con­sin's in­surance com­mis­sioner, known as OCI, is over­see­ing a rehabilitation of its $50 bil­lion port­fo­lio of poli­cies that in­sure res­i­den­tial mort­gage­backed se­cu­ri­ties.

"We're in tri­lat­eral ne­go­ti­a­tions with the com­mit­tee and OCI with re­spect to a global so­lu­tion," Am­bac at­tor­ney Todd Pad­nos told U.S. Bank­ruptcy Judge Shelley Chap­man in New York yes­ter­day. He said an ac­cord would re­solve "the amount to be paid by Am­bac As­sur­ance to the hold­ing com­pany for items in­clud­ing tax re­funds. Am­bac's hold­ing com­pany sep­a­rately is seek­ing an in­junc­tion to tem­po­rar­ily bar the In­ter­nal Rev­enue Ser­vice from seiz­ing a $700 mil­lion re­fund, re­ceived from car­ry­ing back losses on credit-de­fault swap con­tracts. It also asked for a declara­tory judg­ment that it has no tax li­a­bil­ity for 2003 to 2008 and is en­ti­tled to keep the full re­fund.

At yes­ter­day's hear­ing, Filor said the U.S. plans to ask to move ju­ris­dic­tion to a district court, which Am­bac may op­pose. "Novel and com­plex is­sues of fed­eral tax law are ap­pro­pri­ate to go be­fore a fed­eral district court," Filor said.

Am­bac filed for bank­ruptcy Nov. 8, with li­a­bil­i­ties of $1.68 bil­lion as of June 30 on an un­con­sol­i­dated ba­sis.

Am­bac said in its Chap­ter 11 bank­ruptcy that it needed to pre­serve about $7 bil­lion in net op­er­at­ing losses. The IRS has chal­lenged claims by both com­pa­nies to tax de­duc­tions that they say were gen­er­ated by those losses.

The IRS has agreed not to take en­force­ment ac­tion against Am­bac or its sub­sidiaries with­out giv­ing five days' no­tice. The agree­ment will re­main in place un­til a hear­ing to de­cide whether Am­bac can get a judg­ment. The agree­ment calls for the IRS to sub­mit a re­ply to Am­bac's mo­tion by Dec. 31, and for Am­bac to re­ply again by Jan. 18. The hold­ing com­pany case is In re Am­bac Fi­nan­cial Group Inc., 10-15973, U.S. Bank­ruptcy Court, South­ern District of New York (Man­hat­tan). -Bloomberg

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