NU Online News Service, July 13, 1:52 p.m. EDT

Ambac says it hopes it can reach an agreement with Wisconsin's insurance commissioner that will allow the company to file its bankruptcy reorganization plan.

Outlining the current impasse, a company spokesman issued a statement saying that it is in the interest of the Wisconsin Office of the Commissioner of Insurance to minimize the amount that Wisconsin-based Ambac Assurance Corp. pays to its parent, New York-based Ambac Financial Group Inc. (AFG), for the tax benefits associated with the net operating losses (NOLs are operating losses that a company may apply against taxable income in future periods in order to reduce its federal income tax liability).

However, the spokesman notes that it is in the interest of AFG creditors to seek full value for the NOLs.

The statement continues, "In that sense, while the underlying issues are complex, this is a negotiation between two parties who will both benefit from a successful outcome. We are therefore hopeful that an agreement can be reached amongst the parties."

AFG has been in Chapter 11 bankruptcy since late last year after several large financial institutions filed claims for collateralized debt obligations and other financial instruments the company insured during the great recession.

Ambac Assurance was placed into rehabilitation by the Wisconsin insurance commissioner in March of 2010. As part of its rehabilitation plan, Ambac Assurance has set up a segregated account for some Ambac Assurance liabilities at the direction of the insurance commissioner. The segregated account of Ambac Assurance has policies totaling approximately $57.6 billion of as June 2010, consisting of credit derivatives, residential mortgage-backed securities and other structured-finance transactions.  

Last week, Wisconsin Insurance Commissioner Theodore K. Nickel objected to AFG's plan for bankruptcy reorganization, saying he "does not believe that the reorganization plan proposed by Ambac Financial Group Inc. is in the best interests of policyholders of the [Ambac Assurance] segregated account, or for that matter, those of the AFG creditors."