Ambac Submits CDS Settlement Offer to IRS

NU Online News Service, Feb. 28, 11:21 a.m. EST

Bond insurer Ambac Financial Group Inc. says it has offered to pay the Internal Revenue Service more than $100 million dollars and give up tax credits to settle a dispute over tax treatment of credit default swaps.

The offer is part of the New York-based firm’s Chapter 11 bankruptcy reorganization that will be presented to Judge Shelley C. Chapman in U.S. Bankruptcy Court for the Southern District on New York in Manhattan, scheduled for March 13.

The offer was made after several months of negotiations, Ambac says in a statement. The IRS has not yet accepted the offer, the carrier says.

The terms of the settlement to the IRS laid out by Ambac include:

• A payment by the company’s segregated account of Ambac Assurance Corp. of $100 million.

• A payment by Ambac Financial of $1.9 million.

• Relinquishment by the Ambac Financial consolidated tax group of all loss carry-forwards resulting from the loss of CDS contracts on or before Dec. 31, 2010, to the extent that the loss carry-forwards exceed $3.4 billion.

Ambac says there is no assurance the IRS will accept the offer and the final terms of the agreement could still change.

The agreement still needs court approval.

A spokesman for the IRS says it is prohibited by law from discussing individual tax cases.

Ambac says it filed its plan for reorganization for court approval on Feb. 24, which includes the settlement offer to the IRS.

Any objections to the plan must be filed with the court by 4 p.m. Feb. 29.

Ambac was hurt by losses related to its coverage of sub-prime mortgage CDS during the recent financial meltdown and filed for bankruptcy protection in late 2010. The company split its risky obligations into a separate account that is under the domicile of Wisconsin regulators.

Under the agreement, if finally approved, creditors will end up with a fraction of what they are owed. 

Comments

Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Union used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Tech Digest eNewsletter

Technology related insights for insurance professionals including key developments, solution providers and news briefs from the carrier front – FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.