Ambac Financial Group Inc. has provided a preliminary estimate of between a net loss attributable to shareholders of $57 million and net income of $12 million for the fourth quarter of 2017.
The company also expects to report a total comprehensive loss between $103 million and $184 million.
Additionally, the Commissioner of Insurance for the State of Wisconsin, the rehabilitator for Ambac Assurance Corp. Segregated Account, declared an effective date of Feb. 12 for the second amended plan of rehabilitation, which the Circuit Court of Dane County, Wis., had approved Jan. 22. The eligibility distribution record date will be Feb. 5.
The remaining additional steps necessary for the segregated account to exit rehabilitation include the successful execution of the exchange offer transaction, launched Jan. 11; the receipt of consents needed to amend certain settlement agreement provisions; the receipt by Ambac Assurance Corp. of proceeds of $240 million for Tier 2 notes expected to be issued under terms of a commitment letter; approval by the Wisconsin commissioner's office of a one-time current interest payment of at least $12.5 million of interest of Ambac Assurance's surplus notes; and Ambac Assurance having enough capital and claims-paying resources to effect rehabilitation exit transactions.
Ambac expects the conditions will be met by the effective date, but the company cannot guarantee this. If these closing conditions are met, Ambac expects to recognize the principal financial benefits associated with the transactions primarily in the first quarter of 2018. These benefits include a gain of approximately $287 million from the settlement of unpaid claims of $3.9 billion as of Dec. 31, 2017, and about $50 million of income associated with the settlement of deferred amounts of the segregated account held in the consolidated investment portfolio.
In a separate matter, the U.S. District Court for the District of Puerto Rico on Jan. 30 issued two decisions in adversary proceedings related to the Title III restructuring of the Commonwealth of Puerto Rico and certain of its instrumentalities. If Ambac Assurance is unsuccessful with any of its challenges, the company said its financial condition, including liquidity, loss reserves and capital resources, may suffer a material negative impact.
The court dismissed Assured Guaranty Corp. and the other plaintiffs' complaint against the commonwealth and the Puerto Rico Highways and Transportation Authority, among other defendants. The court ruled that the special revenues provisions of the Bankruptcy Code do not require a debtor, post-petition, to apply the special revenues to the bonds they secure.
Ambac Assurance brought similar claims. The court has not yet ruled in that case, but in light of its decision in the Assured Guaranty case, the company said there is a substantial risk that the court will similarly dismiss Ambac Assurance's case.
The court also dismissed ACP Master Ltd. and the other plaintiffs' general obligation bondholders' complaint against the commonwealth and the Oversight Board, ruling that the general obligation bondholders' effort to compel application of certain revenues would interfere with the commonwealth's governmental powers.
