Ambac Financial Group, Inc. (OTCMarkets: ABKFQ) is about to do what many investors would have considered to be impossible. The public finance guarantor is set to exit bankruptcy. While new shares are going to be issued, it is important for investors and holders of the old “ABKFQ” shares are not going to have any salvage value in this bankruptcy exit.

Ambac issued a press release showing that the United States Bankruptcy Court for the Southern District of New York has approved a settlement with the United States that brings resolution to claims filed by the Internal Revenue Service and related litigation. Another approval from the Bankruptcy Court is that Ambac will enter into an amendment to the existing tax sharing agreement with Ambac Assurance Corporation as well as certain modifications to Ambac’s Fifth Amended Plan of Reorganization.

The company said, “Ambac is scheduled to execute a closing agreement with the IRS on April 30, 2013, concurrent with its payment of $1.9 million, and the Segregated Account of Ambac Assurance Corporation’s payment of $100 million, to the United States… Ambac expects to fulfill the remaining conditions to the effectiveness of the Plan on or before May 1, 2013.”

The reorganization will be as follows:

• Ambac will distribute 45,000,000 new common shares and 5,047,138 new warrants to holders of allowed claims.
• All existing common stock (the ABKFQ) of the company will be cancelled on the effective date and the holders of such stock will not receive any distributions under the Plan.
• Ambac has received approval from the NASDAQ OMX Group to list its new common shares under the ticker “AMBC” and the new warrants under the ticker of “AMBCW.”

This would have seemed impossible to expect that Ambac would return and clear through bankruptcy court as recently as last year. Now it just seems hard to believe. Ambac will be returning (sorry, re-emerging) as a public stock again.

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