Ambac (ABK) Commutes $3.5B of CDO Exposure for Cash Settlement of $1B
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Ambac Financial Group, Inc. (NYSE: ABK) today announced that it has commuted two CDO of CDO of ABS (commonly referred to as CDO-squared) exposures and two high grade CDO of ABS exposures. The four transactions, with an aggregate of approximately $3.5 billion notional outstanding at September 30, 2008, were settled with counterparties in exchange for a total cash payment by Ambac Assurance Corporation of $1.0 billion. The two CDO-squared transactions originally comprised collateral consisting of A-rated CDO of ABS tranches, and the two high grade CDO of ABS exposures originally comprised collateral consisting of asset-backed securitizations rated A- or higher. Most of the collateral had been downgraded to below investment grade since the inception of the transactions. All four of the transactions had been internally downgraded to below investment grade.
As a result of the settlements, Ambac expects to record positive adjustments to its aggregate mark-to-market and impairment reserves.
Ambac Financial Group, Inc., through its subsidiaries, provides financial guarantee products and other financial services to clients in the public and private sectors worldwide.
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