Ambac (AMBC) Settles RMBS Litigations Against Bank of America
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(Updated - October 7, 2022 7:22 AM EDT)
Ambac Financial Group (NYSE: AMBC), a financial services holding company whose subsidiaries include Ambac Assurance Corporation (“AAC”), today announced that AAC entered into an agreement to settle all of its claims1 against Bank of America and related entities for $1.84 billion.
This settlement materially exceeds the amount of subrogation recovery recorded on Ambac’s 2Q 2022 financial statements. As a result, Ambac estimates that it will record a gain with respect to the settlement of approximately $390 million, net of reinsurance and discount accretion and call premiums on AAC’s secured debt. A portion of this gain will be recognized in Ambac’s third quarter financial results and the remaining portion will be recognized in Ambac’s fourth quarter financial results.
In accordance with its contractual obligations, AAC will repay all outstanding Sitka Notes of approximately $1.21 billion (including the associated call premium) as well as approximately $213 million of Tier 2 Notes. Funds are expected to be received within 10 days following the satisfaction of certain conditions, including dismissal of the pending RMBS litigations.1 Complete third quarter financial results will depend on numerous other factors that will be included in Ambac's third quarter 2022 Form 10-Q.
For the period ending June 30, 2022, Ambac recorded a gross subrogation recovery on its balance sheet of $1.48 billion related to RMBS representation and warranty litigation, of which, $1.38 billion related to Bank of America litigation.1 The balance of the gross subrogation recovery relates to AAC’s case against Nomura Credit & Capital, Inc. and Nomura Holding America Inc.
Claude LeBlanc, President and Chief Executive Officer, stated, “Ambac is very pleased to have reached this settlement with Bank of America, which materially advances our strategic priority to progress AAC to a stable runoff and further maximizes optionality for our legacy financial guaranty business.”
1Includes the following pending litigations: Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation v. Countrywide Home Loans, Inc., Countrywide Securities Corp., Countrywide Financial Corp., and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 653979/2014, filed on December 30, 2014). Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Countrywide Securities Corp., Countrywide Financial Corp. (a.k.a. Bank of America Home Loans) and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 651612/2010, filed on September 28, 2010), and Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. First Franklin Financial Corporation, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Inc., Merrill Lynch Mortgage Lending, Inc., and Merrill Lynch Mortgage Investors, Inc. (Supreme Court of the State of New York, County of New York, Case No. 651217/2012, filed April 16, 2012).
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