Ambac Financial Group said yesterday that it has commuted two CDO of CDO of ABS exposures and two high grade CDO of ABS exposures.

The four deals, with a combined worth of roughly $3.5 billion notional outstanding at Sept. 30 were settled with counterparties in exchange for a total cash payment by Ambac Assurance Corp. of $1.0 billion.

The two CDO-squared transactions originally comprised collateral consisting of A-rated CDO of ABS tranches, and the two high grade CDO of ABS exposures that were intially made up of collateral consisting of ABS deals rated A- or higher. Most of the collateral had been downgraded to below investment grade since the start of the transactions. All four of the transactions had been internally downgraded to below investment grade.

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