Ambac Financial Group said that it has commuted all of its remaining $16.4 billion of exposure to CDOs of ABS.

The commutation agreement with several CDO of ABS counterparties provides that AAC will pay in the aggregate $2.6 billion in cash and $2 billion of newly issued surplus notes of AAC.

The surplus notes have a scheduled maturity of June 7, 2020. Interest on the surplus notes is payable at the annual rate of 5.1%.

All payments of principal and interest on the surplus notes will be subject to the prior approval of the Office of the Commissioner of Insurance of the State of Wisconsin.

Additionally, certain non-CDO of ABS transactions with par or notional amounting to approximately $1.4 billion were commuted for cash payments of $96.5 million and it is expected that, subject to certain conditions, certain other non-CDO of ABS exposures with par amounting to a maximum of around $1.5 billion will be commuted within the next 12 months for a maximum amount of about $115 million of cash plus $60 million of surplus notes of AAC.

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