NU Online News Service, May 24, 1:37 p.m.EDT

Wisconsin's commissioner of insurance amended his decision fromlast week and will now allow Ambac to purchase just two of threebank notes.

Wisconsin Insurance Commissioner Ted Nickel says there will be acost savings by not going through with the original approval.

Bond insurer Ambac Assurance Corp. received permission last weekto exercise call options to purchase $939 million in par value surplus notesthe company issued in 2010. The company expected to payaggregate cash value of $278 million.

In the amended motion filed with the Dane County Courtin Wisconsin, Nickel has decided that of the three notes with threedifferent banks, two will be paid because of an unfavorableprovision in the agreement with the third bank.

Under that provision, the bank would have to be paid an amountequal to the highest rate-per-dollar in the call option.

As such, the other two banks would be paid at a rate of 20 centson the dollar, while the third would receive 30 cents on thedollar.

To avoid paying a higher rate, and possibly protractedlitigation or negotiation, the department decided to approve thenote purchase of only two banks.

Under terms of the amended order, Ambac will also pay intereston the notes, which was not permitted under the original order.

The current approval allows for the purchase of approximately$789 million in par amount notes for a total cost of approximately$188 million.

The notes were issued in 2010 as part of a settlement agreementwith three unnamed banks. That same year, New York-based Ambacfiled for bankruptcy protection after suffering severe losses frominsuring structured-financial instruments. The company received permission to reorganize in March, but it hasnot yet implemented the plan.