Ambac Financial Group, Inc. (ABK) has withdrawn its plans for the sale of up to $1 billion worth of securities, as the late filing of its 10-K for fiscal 2009 annual report debarred it from issuing securities. Ambac Financial withdrew the S-3 registration statement filed on April 1, 2009.

Earlier this month, the company was also preparing for bankruptcy protection to restructure its outstanding debt. Ambac also fears its inability to cover its operating expenses and debt service obligations after the second quarter of 2011.
 
The company has been enmeshed in difficulties since the U.S. housing market collapsed in 2008. Previously, in November 2009, with the filing of the third quarter 2009 10-Q Ambac had announced that it might file for bankruptcy protection if it fails to pull through its cash position.
 
Following the state of Wisconsin taking control of some of the company’s $64 billion worst-hit assets in March 2010, Ambac Financial once again resounded the warning.
 
During the second quarter of 2010, Ambac posted a loss of 20 cents a share. However, the loss incurred in the quarter saw a substantial improvement from the loss of $8.24 per share reported in the prior-year period.  Nevertheless, the company continues to suffer losses in consumer asset-backed securities, other structured finance exposures and poor performance at The Financial Services segment.
 
Ambac is vigorously trying to lower its debt level. The company has been swapping debt for equity. On June 8, the company commuted $16.4 billion of exposure to collateralized debt obligations of asset-backed securities and $1.4 billion non-collateralized debt obligations of asset-backed securities. Ambac also intends to convert certain other non-collateralized debt obligations of asset-backed securities exposures worth $1.5 billion.
 
On June 17, Ambac exchanged $8.5 million in debt for 5 million shares of Ambac’s common stock. Again, on June 30, the company further converted another $11.8 million in debt to 8.6 million shares of Ambac’s common stock.
 
However, equity issuance entails earnings dilution. With the number of outstanding shares increasing, earnings per share would fall if the company fails to report improved earnings, affecting investor confidence, going forward.
 
The share price of Ambac Financial dipped approximately 9.5% on Thursday to close at 49 cents. The stock has lost 40% of its value in the past three months and approximately 50% since the start of 2010.
 


 
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