News

Dunkin Brands Inc. and Sonic Corp. likely affected by Ambac case

July 25, 2010

Ambac Assurance Corp. now has more than $67 billion of its insurance coverage placed into a special receivership fund. The case has been playing out for more than two years and has caught national attention because of its potential affects on some quick-service restaurant businesses.

According to the Milwaukee-Wisconsin Journal Sentinel, Ambac provides insurance that guarantee bondholders are paid. However, many of those bonds have since gone into default. The company insures almost $400 billion in bonds, including state and local governments and hospitals throughout Wisconsin.

Also among the potentially affected companies are Dunkin' Brands Inc., owner of Dunkin' Donuts and Baskin-Robbins, and Sonic Corp. Both companies sold bonds guaranteed by Ambac.

No one involved in the case seems to be able to predict how much longer it will continue to play out. Also at issue is the exorbitant cost of legal fees for the case. Ambac is paying between $2 and $3 million a month to attorneys involved in subprime loan litigation.

The companies involved are currently on payments, however bondholders are able to call their loans if Ambac's policies are placed into a rehabilitation account.