Ambac Financial Group – Bankruptcy Protection Becoming a Reality
Posted on | November 11, 2009 | No Comments
On Tuesday, November 10th, 2009, Ambac Financial Group stated that it may have to file for bankruptcy protection in the near future. The bond insurer filed that it should be able to get through the second quarter of 2011 but it could run out of cash sooner. The primary subsidiary of Ambac, Ambac Assurance Corporation, was unable to pay dividends this year and it is very possible that they will not pay any dividends in 2010 either.
When the housing market crashed Ambac took on huge risks by taking part in risky mortgages that were combined with municipal bonds. Prior to the mortgage collapse Ambac was highly successful because the backed municipal bonds that rarely defaulted and paid consistent dividends. The new bonds that were created during the housing bubble may end up causing the company to file for bankruptcy.
Shares of the bond insurer closed at 79 cents on Tuesday. Over the last two years Ambac has lost over 99% of its value. The stock once traded near $100 and is now less than $1 and likely to go lower if the rumors of bankruptcy persist. This is one of many companies who have seen the subprime mortgage crisis rear its ugly head.
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Author: Heather Best
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