It's Finally Over For Ambac (ABK), Shares Drop To $.62

Ambac (ABK) may be the last of the big financial firm flameouts coming out of the credit crisis. The only probable exceptions are Fannie Mae (FNM) and Freddie Mac (FRE), which the government may take through token bankruptcies to cleanse themselves of their equity holders and unsecured debt holders.

Ambac said today that it faces nearly impossible capital difficulties after the municipal bond firm passed control of $35 billion worth of troubled assets to a Wisconsin regulator – the Office of the Commissioner of Insurance of the State of Wisconsin.

Ambac’s board promptly issued a statement where it said part of the company is still solvent, but that may mean very little.

“The Board of Directors of Ambac Assurance UK Limited (“AUK”) today issued the following comments on the implications for AUK of the rehabilitation of the segregated account of AUK’s parent, Ambac Assurance Corporation (“AAC”), by the Office of the Commissioner of Insurance (“OCI”) of the State of Wisconsin, USA: AUK is a subsidiary of AAC and is a separate legal entity. AUK is regulated by the UK Financial Services Authority and is not in rehabilitation or any other insolvency proceedings.”

With a large part of its asset base gone, it does not have enough balance sheet buoyancy to remain afloat.

Douglas A. McIntyre