Ambac Financial equity security holders group objects to amended plan

By Lisa Kerner

Charlotte, N.C., March 5 - Ambac Financial Group, Inc.'s informal ad hoc group of equity security holders filed an objection to the company bid for confirmation of its third amended plan of reorganization, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

A hearing is set for March 13, the date of the plan confirmation hearing.

The equity group believes the debtor is being undervalued both on an enterprise and liquidation value basis. Also, the plan is not confirmable, in part, because it contains impermissible third-party releases which members of the equity group have not consented to and for which they are receiving no consideration, the filing said.

Amended plan

As previously reported, Ambac filed a third amended plan of reorganization in late February that includes provisions related to an agreement with Ambac Assurance Corp., the segregated account of Ambac Assurance, the Wisconsin Office of the Commissioner of Insurance, the rehabilitator of the segregated account, and the committee of creditors in the Chapter 11 case with respect to outstanding tax and expense-related issues between Ambac Financial and Ambac Assurance.

Treatment of creditors

The treatment of creditors was unchanged from the original version of the plan.

Under the amended plan:

• Holders of senior notes claims will receive new common stock in the reorganized company;

• Holders of general unsecured claims will receive new common stock and, if the senior noteholders vote to accept the plan, warrants;

• Holders of subordinated notes claims will, if the senior noteholders vote to accept the plan, receive warrants and, if the subordinated noteholders vote to accept the plan, 1.5% of the new common stock;

• Holders of secured claims will either be paid in full in cash or receive the collateral securing their claims; and

• Holders of Section 510(b) claims, intercompany claims and equity interests will receive no distribution.

Ambac Financial Group is a New York-based company that provides financial guarantee insurance for public and structured finance obligations. The company filed for bankruptcy on Nov. 8, 2010, and its Chapter 11 case number is 10-15973.

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