NEW YORK ( TheStreet) -- Ambac Financial Group ( ABK) is in talks with senior creditors to file a prepackaged bankruptcy, according to a Securities and Exchange Commission filing.

The company warned the board that it is declining to make an interest payment on the company's debt due November 15. As of June 30, 2010, Ambac had debt of $1,622 million.

"This is not a big surprise. It is something that they have been warning about for some time and now it is happening," said Jim Ryan, a senior analyst at Morningstar. "They file bankruptcy and the Wisconsin will take over the operations."

Wisconsin is where Ambac's insurance operations are domiciled.

Ambac had been trying to raise capital, but was unsuccessful. Earlier this year Moody's put out a note saying that Ambac's creditors -- which include Centerbridge Partners, Halcyon Capital Management, Mangrove Partners and Camden Asset Management -- are likely to back the company similar to how the creditors backed CIT's ( CIT)bankruptcy arrangements.

"The holding company is likely to file bankruptcy and the Wisconsin insurance commissioner will take over. The remaining policies in the subsidiary would go into run off, provided they can get work out on their loans," Ryan said.

Earlier this year, TheStreet explored what form a prepackaged bankruptcy may take in case Ambac explored that option.

--Written by Maria Woehr in New York.

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