Boston, MA 02/26/2014 (wallstreetpr) – Ambac Financial Group, Inc. (NASDAQ:AMBC) has found its reason to pull a substantial attention towards it. After emerging gracefully out of its bankruptcy last spring, Ambac is likely to get another dose of boost from Bank Of America Corp (NYSE:BAC).
Ambac-Bank of America Tussle
The legal spat between Ambac Assurance Corp and Bank of America Corp began in September last year after the former sued the bank in connection to $16.7 billion mortgage-backed securities. Ambac alleged that the Bank of America’s Countrywide Financial Corp. unit acted fraudulently to persuade it to insure the said bonds, which were originally risky in nature.
In a complaint filed with the Supreme Court in New York, Ambac Financial Group, Inc. (NASDAQ:AMBC) highlighted that nearly 97% of the reviewed 6,533 loans did not meet the lender’s underwriting guidelines. Among these most of the loans were advanced to the borrowers who either had limited or no ability to honor the debt obligations. Resultantly, Ambac has to scoop out nearly $466 million towards claims from defaulted 35,000 home-equity loans. Later, Countrywide Financial was acquired by the Bank Of America Corp (NYSE:BAC) in 2008, thereby, transferring its liability to the Bank. Since then Bank of America did not settle the claims as it would have meant a huge amount for it to reinstate Ambac.
Bank of America’s 10-K Filing
As MarK Palmer from BTIG Research Firm decoded the Bank Of America Corp (NYSE:BAC)’s 10-k filing, it sees an abundant opportunity for Ambac in the forthcoming period. The Bank noted that Ambac’s claims are in excess of $2.5 billion, which is actually more than Ambac Financial Group, Inc. (NASDAQ:AMBC)’s total R&W reserve. Palmer believes it as a positive development for Ambac, which had reported accrued claims of over $1 billion in the aggregate, according to its most latest complaint against BAC. On top of this, Ambac has factored in R$W recoveries of close to $2.371 billion in its book value, which means that recoveries over and above this are not reflecting currently. This is just from Bank of America, whereas, it is pursuing bigger recoveries from JPMorgan Chase & Co (NYSE:JPM) for $941 million, and hundreds of millions of dollars from Nomura, First Franklin and Capital One.
This goes well with the Ambac Financial Group, Inc. (NASDAQ:AMBC)’s CEO Diana Adams objective line during the third quarter financial results, where she stressed that the company is leaving no stone unturned to achieve its due recoveries.
