Ambac Warns It May File For Bankruptcy Protection

NEW YORK (AP) — Shares of Ambac Financial Group Inc. plunged 33 percent Tuesday after the embattled bond insurer said it may be forced to file for bankruptcy protection if it cannot improve its cash position.

In a filing with the Securities and Exchange Commission late Monday, the company said it believes it has sufficient liquidity to get through the second quarter of 2011, but warned it could run out of money sooner. The company said it may not be able to generate enough cash to pay operating expenses and debt obligations over the long term and may be unable to access alternate sources of capital given the current state of credit markets.

The holding company's primary subsidiary, Ambac Assurance Corp., cannot pay dividends this year and likely will not pay them in 2010, the company said in the filing. Ambac Financial is considering possibly restructuring its debt through a prepackaged bankruptcy proceeding, but said that if it cannot bolster its capital position it may file for bankruptcy without a lender agreement in place.

"No assurances can be given that Ambac will be successful in executing any or all of its strategies," it said in the filing. "If Ambac is unable to execute these strategies, it will consider seeking bankruptcy protection without agreement concerning a plan of reorganization with major creditor groups."