MADISON, Wis., April 21, 2014 /PRNewswire/ -- Acting in his capacity as Court-appointed rehabilitator (the "Rehabilitator"), Wisconsin Commissioner of Insurance Ted Nickel today filed a motion (the "Rehabilitator's Motion") in the Circuit Court of Dane County, Wisconsin for approval of certain proposed amendments (the "Amendments") to the confirmed Plan of Rehabilitation (the "Plan") of the Segregated Account of Ambac Assurance Corporation (the "Segregated Account").
If the Rehabilitator's Motion is approved, the Amendments will modify the mechanism for handling claims under the Plan. Instead of a combination of cash payments and interest-bearing surplus notes pursuant to the original Plan, holders of Permitted Policy Claims would receive a combination of cash payments ("Interim Payments") and deferred amounts equal to the remaining balance of such claims ("Deferred Amounts"). Payments of Deferred Amounts will be made at such times as the Rehabilitator deems appropriate, in his sole discretion, based on an analysis of estimated liabilities, available claims-paying resources and other considerations relevant to equitable treatment of claims and the best interests of policyholders. With the exception of adjustments for certain Under-collateralized transactions, as described in the Rehabilitator's Motion, Deferred Amounts will accrete at an effective annual rate of 5.1%. Permitted General Claims will receive Junior Deferred Amounts accreting at 5.1% per year, instead of junior surplus notes bearing interest at 5.1%, as specified by the original Plan.
In conjunction with amending the Plan, the Rehabilitator intends to increase Interim Payments. The 25% level specified in the original Plan and in the Rehabilitator's Motion for Approval to Commence Interim Payments, dated May 16, 2012 (which payments commenced on September 20, 2012), will be increased to the level of 45%. Hence, after the Plan is amended, subject to Court approval, (i) holders of Permitted Policy Claims will receive Interim Payments in cash equal to 45% of their claims, and (ii) the Segregated Account will record Deferred Amounts on its books in favor of the respective holders in an amount equal to 55% of such claims, which will accrete at an effective annual rate of 5.1%.
To maintain parity among policyholders, the Rehabilitator also intends to effectuate a Deferred Payment to provide that policyholders that have received 25% cash payments on Permitted Policy Claims since the Interim Payments began on September 20, 2012 will receive an equalizing payment in cash in an amount equal to 26.67% of such holders' Deferred Amounts, including the value of Accretion. The Amendments will require proportionate payments on Segregated Account Surplus Notes, as and when payments are made on Deferred Amounts, including the equalizing payment referenced above. Pursuant to the terms of the Settlement Agreement entered into by Ambac Assurance Corporation ("Ambac Assurance") and various settling counterparties on June 7, 2010, Ambac Assurance is also required to make proportionate payments on its Surplus Notes if the Segregated Account makes a payment on the Segregated Account Notes.
"These Amendments are consistent with my goal of ensuring that policyholders in the Segregated Account receive equitable treatment," said Commissioner Ted Nickel. "Since the original Plan was confirmed by the Court, we have made significant strides to preserve resources, mitigate losses and reduce uncertainties. I am confident that the changes represented by the Amendments and my decisions regarding cash payments are balanced and sustainable."
Before the Amendments can become effective, the Rehabilitator's Motion must be approved by the Honorable William D. Johnston for the Wisconsin Circuit Court for Dane County. The Rehabilitator anticipates that the Court will schedule a hearing to consider the motion. Copies of the Court filings, including the Plan, as amended, the Payment Guidelines and other supporting documents are available on www.ambacpolicyholders.com.
SOURCE Ambac Assurance Corporation