Ambac Financial Group Inc. of New York settled one of its largest collateralized debt obligations Friday, paying $850 million to Citigroup Inc.
The payment terminates the insurance contract Ambac had with the New York-based bank, covering AA Bespoke, a $1.4 billion AA-rated CDO of asset-backed tranches composed of mortgage-related securities, most of which have been downgraded to below investment-grade, Ambac said in a statement.
Following the transaction, the bond insurer said it will record a $150 million positive pretax adjustment.
Ambac is not alone.
Last week, Security Capital Assurance Ltd. of Hamilton, Bermuda — now known as Syncora Guarantee Inc. — announced that had terminated eight credit default swaps and their insurance contracts with Merrill Lynch & Co. Inc., saying that it would pay the New York-based financial institution $500 million.
The CDOs involved are worth some $3.74 billion, according to a statement from Syncora.
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