Case Study

Ambac

CLIENT: State of Wisconsin Office of Commissioner of Insurance ("OCI"), which is the regulator for Ambac

Gordian Group has been advising a regulator in its oversight of a leading reinsurance company.

Business Profiles

Situation

Ambac Assurance Corp., (“Ambac”), the bond insurance unit of Ambac Financial Group, was suffering enormous losses on its structured finance book, mostly from insurance contracts tied to subprime residential housing. It had been downgraded to Ca (Moody’s) and ceased writing new business. There was market speculation questioning its solvency.

Engagement

Gordian Group was engaged as joint financial advisor (with Jefferies & Co.) to OCI to assess potential claims in Ambac’s portfolio, review potential remediation strategies and work with the parties to develop courses of action to handle policyholder claims.

Outcome

Working with OCI and its legal advisors for over two years, Gordian developed and negotiated an innovative restructuring plan for Ambac that contemplates: (i) commuting CDO of ABS claims at a significant discount, (ii) placing RMBS policies, credit default swaps and certain other policies into a segregated account (which will be run off), and, (iii) preserving significant value for municipal policyholders, Ambac’s historic core customers. The transaction was announced in March 2010. Work continues on behalf of OCI in connection with Ambac and its ongoing rehabilitation.