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Subject:  Re: AMBAC 5.95% Debenture Maturity 2/28/2103 Date:  12/20/2012  6:23 PM
Author:  joelcorley Number:  34566 of 36785


You wrote, This asset is sitting on a family member's Vanguard account and they are asking for advice. The line item is:

"DEB 5.95 PFD callable 2/28/08 @ 25.00 MTY 2/23/2103".

A value of $8.00 is shown on the hardcopy. Cost was about $14.00.

A Vanguard rep said they can be sold and have traded as high as $10.00. He had no idea what they would fetch on the market today.

AMBAC seems to be emerging from Chapter 11. They had a good Q3 and have approval from the bankruptcy judge. However, their bankruptcy proposal contains a significant haircut for creditors:

"Its restructuring plan allows for recoveries of between 11.4 and 17.6 cents on the dollar for holders of $1.25 billion in senior notes, and between 8.5 and 13.2 cents on the dollar for general unsecured claimholders, according to court papers.

I assume this is the ETD symbol AKF? QuantumOnline lists this symbol as suspended - obviously over the BK filing. Perversely TD Ameritrade and Fidelity don't quote the symbol. (Fidelity lists it in its symbol search; but won't quote it.) Since the par value of the issue is $25/share and if the work-out appears to be worth at most 17.6% of par (or $4.4/share), I would tell the broker to try to sell now - especially if he can get $8/share.

I've not read all the relevant material; but a quick scan tells me that these are senior unsecured exchange-traded debentures, which makes your family member part of the senior unsecured creditors of Ambac. At least they hadn't purchased a preferred issued. Often preferred shareholders are completely wiped out in BK.

Even so it seems unlikely there is any scenario where this issue is suddenly going to more than double in value overnight, even assuming Ambac comes out of BK sooner rather than later. That alone would convince me to be happy I could recover $8/share.

- Joel
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