Ambac Financial Group Inc, which was the second-largest U.S. bond insurer before suffering huge losses on risky mortgages, filed for Chapter 11 bankruptcy on Monday. The bankruptcy was filed in Manhattan, NY bankruptcy court as the Company declared that its liabilities totaled $1.68 billion.
Ambac started digging itself into a deep hole when it began grasping for higher profits and expanded beyond the its safe haven of municipal bond insurance and began backing riskier debt. Upon the crash of the housing market a few years ago, credit markets became stiff and the insurance giant spun into a world of trouble. Despite efforts, Ambac claims that it was unable to raise enough capital and was unable to reach any agreement with senior bondholders that would have accommodated the Company restructuring through a prepackaged bankruptcy.
Shares of ABK have plummeted in after-hours trading from $0.52 down to $0.19 and will be on alert in the morning for riskier “dead cat bounce” traders looking to scalp it for intraday bounces.
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