Ambac’s Bankruptcy, The Inevitable Outcome (ABK)

Ambac did agree to a non-binding term sheet that will serve as a basis for further negotiations with the ad-hoc committee, which may allow it to emerge from bankruptcy more expeditiously.

As of June 30, 2010, Ambac had debt outstanding amounting to $1,622 million and its outstanding debt securities are accelerated as a result of the bankruptcy filing.

Ambac has been one of our top brands to disappear in 2010.  Technically, bankruptcy does not definitely mean the brand will disappear, but the bankruptcy will mean it is a new company under new management.  You can never say never, but generally the common shareholders get wiped out in these bankruptcies that renegotiate the debt.  Debtholders rather than the former common holders become the new common holders and they main remain creditors as well.

Ambac shares are down 60% at $0.21 in very active pre-market trading.

JON C.OGG