NU Online News Service

Ambac Financial Group Inc. said it intends to file for Chapter11 bankruptcy before the end of the year if it cannot reach anagreement with debt holders.

In a filing with the U.S. Securities and Exchange Commission,Ambac said it chose not to make a scheduled interest payment onsenior notes due in 2023, which could allow its debtors toaccelerate the maturity of the notes if a payment is not madewithin 30 days.

"To date, the company has been unable to raise additionalcapital as an alternative to seeking bankruptcy protection," Ambacsaid in the filing.

The company said it has been trying to negotiate with debtholders to restructure its debt under a pre-packaged bankruptcyagreement, but there "can be no assurance that any definiteagreement will be reached."

For the first six months of 2010, net losses for Ambac stood at$748 million. Results were affected by commutation settlements oncredit default obligations of asset-backed securities and claimpayments on residential mortgage-backed securities and investmentlosses related to securities.

Ambac said it either plans to pay the interest on the notes, tryto reach an agreement with debt holders for a pre-packaged plan ofreorganization, or file for Chapter 11. If an agreement issuccessful, Ambac said in the filing that it plans to file forbankruptcy with a related pre-packaged plan.

In October regulators in Wisconsin released a rehabilitation plan to giveclaimants cash and notes.

The New York-based guarantee insurer Ambac Financial Group saidthe subsidiary placed in rehabilitation, Ambac Assurance Corp.,holds policies totaling about $57.6 billion.

Recently, Ambac sued Bank of America over the lending practicesof Countrywide that the bank acquired in 2007. The insurer accusedthe mortgage lending company of failing to follow its ownguidelines and granting loans to individuals who were unable topay. The practice resulted in $1.95 billion in loan defaults, andthe insurer made more than $466 million in claims payments.