Ambac Assurance Corp.’s rehabilitation plan won’t take effect in May as planned, meaning that frozen claims on roughly $50 billion of risky assets will remain unpaid until further notice.

Ted Nickel, Wisconsin insurance commissioner and rehabilitator of Ambac, released a statement Monday saying he “is not satisfied that the conditions necessary for the plan to become effective have all been satisfied, and believes that this decision is in the best interest of the policyholders.”

No further comment was given.

The commissioner’s rehab plan was proposed in October and accepted by Judge William Johnston, of the Dane County Circuit Court, on Jan, 25. He said the plan satisfied all applicable requirements of Wisconsin law and was more favorable to policyholders, creditors and the public than alternative regulatory options.

Once the second-biggest bond insurer, Ambac ran into serious trouble in late 2007 because of decaying credit quality in its structured finance policies, which included contracts guaranteeing to cover losses on mortgage bonds and credit default swaps.

The Wisconsin regulators responded by taking Ambac’s riskiest assets, depositing them into a walled-off account, and freezing all payment claims to avoid a first-come, first-serve run on the company’s assets. Those claims have been frozen since March 2010.

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