Ambac Skips Interest Payment,Mulls Prepackaged Bankruptcy Plan

Ambac Financial Group Inc. (ABK) warned on Monday that its board declined to make an interest payment and said it is negotiating plans for a prepackaged bankruptcy proceeding with senior debtholders.

Shares plunged 48% to 43 cents in recent premarket trading.

The bond insurer's protection of mortgage-backed securities, which soured along with the housing market, battered it alongside much of the industry. It warned in June it might have to file for bankruptcy protection but later that month reached a deal to swap equity for debt with some bondholders.

The company said Monday its board decided not to make a regularly scheduled payment on debentures due in 2023. It is pursuing a restructuring of its outstanding debt through a prepackaged bankruptcy proceeding with "an ad hoc committee of senior debtholders." If it can't reach an agreement for such a plan, it plans to file for Chapter 11 bankruptcy by the end of the year.

Ambac had total indebtedness of $1.62 billion as of June 30.

The announcement comes after a group of bondholders last week panned a rehabilitation plan filed last month by Wisconsin's insurance regulator for Ambac's bond insurance unit.

 
   -By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; [e-mail]