FGIC Corp. has filed a voluntary petition for protection under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of New York, the firm announced today.
Filing for bankruptcy will allow FGIC to deleverage its balance sheet and restructure more than $300 million of debt, the company stated in a release.
The insurer has also submitted a plan of reorganization and a disclosure statement as a part of its filing and expects to progress quickly through the Chapter 11 case.
None of the firm’s subsidiaries or affiliates, including wholly-owned subsidiary Financial Guarantee Insurance Co., are involved with the filing, according to the company, which has hired Kirkland & Ellis to aid in its restructuring.
In February 2010, Moody’s Investors Services put out a report saying that FGIC, after reporting substantial negative statutory surplus and breaching regulatory capital requirements by a large margin, had been ordered by its regulator to suspend all claims payments until it could implement a capital-strengthening plan that would involve the settlement of claims at a deep discount.
As a result, Moody's predicted that the company could face insolvency or receivership, depending on the outcome of restructuring and commutation.
As of February, FGIC had submitted plans to regulators to restore policyholder surplus, according to Moody’s.
