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Long-Term Debt (Notes) | 12 Months Ended
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Dec. 31, 2021
Debt Disclosure [Abstract] |
Long-term Debt | 12. LONG-TERM DEBT Long-term debt outstanding, excluding VIE long-term debt, was as follows:
December 31, |  |  |  | 2021 |  | 2020
|  |  |  | Par Value |  | Unamortized Discount |  | Carrying Value |  | Par Value |  | Unamortized Discount |  | Carrying Value
Ambac Assurance: |  |  |  |  |  |  |  |  |  |  |  |  |  |
5.1% Surplus Notes |  |  |  | $ | 785 |  |  | $ | (56) |  |  | $ | 729 |  |  | $ | 531 |  |  | $ | — |  |  | $ | 531 |
5.1% Junior Surplus Notes |  |  |  | — |  |  | — |  |  | — |  |  | 365 |  |  | (118) |  |  | 247 |
LSNI Ambac Note |  |  |  | — |  |  | — |  |  | — |  |  | 1,641 |  |  | — |  |  | 1,641 |
Sitka AAC Note |  |  |  | 1,175 |  |  | (21) |  |  | $ | 1,154 |  |  | — |  |  | — |  |  | — |
Tier 2 Notes |  |  |  | 333 |  |  | — |  |  | 333 |  |  | 306 |  |  | — |  |  | 306 |
Ambac UK Debt |  |  |  | 41 |  |  | (26) |  |  | 15 |  |  | 41 |  |  | (27) |  |  | 14 |
Long-term debt |  |  |  | $ | 2,334 |  |  | $ | (104) |  |  | $ | 2,230 |  |  | $ | 2,884 |  |  | $ | (145) |  |  | $ | 2,739 |
Aggregated annual maturities of non-VIE long-term debt obligations (based on scheduled maturity dates as further discussed below) are as follows:
2022 |  | $ | 785 |  | (1)
2023 |  | — |  |
2024 |  | — |  |
2025 |  | — |  |
2026 |  | 1,175 |  |
Thereafter |  | 373 |  |
Total |  | $ | 2,334 |  |
(1) Surplus Notes issued had a scheduled maturity date of June 7, 2020. OCI declined the request of Ambac Assurance to pay the principal amount of the surplus notes, plus all accrued and unpaid interest thereon, on June 7, 2020, and June 7, 2021. As a result, the payment date for principal of the surplus notes was extended until OCI grants approval to make the payment. Interest will accrue, compounded on each anniversary of the original scheduled payment date or scheduled maturity date, on any unpaid principal or interest through the actual date of payment at 5.1% per annum. Included in the table above is the potential principal payment at the next scheduled payment date of June 7, 2022. Surplus Notes Ambac Assurance's Surplus Notes, with a par amount of $785 and $531 at December 31, 2021 and 2020, respectively, had a scheduled maturity of June 7, 2020, which has been extended until OCI grants approval to make the payment. During the year ended December 31, 2021, in connection with the 2021 Surplus Note Exchanges and other transactions, Surplus Notes with aggregate par amount of $255 were re-issued, and all Junior Surplus Notes were acquired and extinguished. The discount on Surplus Notes issued prior to 2021 was accreted into income using the effective interest method based on projected cash flows at the date of issuance through June 7, 2020, using a weighted average imputed interest rate of 10.1%. The discount on Surplus Notes issued during the year ended December 31, 2021, is being accreted into income using the effective interest method at a weighted average imputed interest rate of 8.9%. Refer to Note 1. Background and Business Description for further discussion of the 2021 Surplus Note Exchanges. Ambac can provide no assurance as to when surplus note principal and interest payments will be made, if ever. If OCI does not approve regular payments on surplus notes within the next several years, the total amount due for surplus notes may exceed AAC's financial resources and holders of surplus notes may not ever be paid in full. Surplus notes are subordinated in right of payment to other claims, which could impair the right of holders of such notes to receive interest and principal in the event of AAC's insolvency or a similar occurrence. Sitka AAC Note The Sitka AAC Note, issued in connection with the Secured Note Refinancing on July 6, 2021, as more fully described in Note 1. Background and Business Description, has a par value of $1,175 at December 31, 2021, and a legal maturity of July 6, 2026. Interest on the Sitka AAC Note is payable quarterly (on the last day of each quarter beginning with September 30, 2021) at an annual rate of 3-month U.S. Dollar LIBOR + 4.50%, subject to a 0.75% LIBOR floor. The discount on Sitka AAC Note is being accreted into income using the effective interest method based on an imputed interest rate of 5.7% The Sitka AAC Note is redeemable prior to July 6, 2022, at a price of 100% of the principal amount plus a make-whole premium and accrued and unpaid interest. The make-whole premium represents the excess of the present value of 103% of the principal amount plus all required scheduled interest payments through July 6, 2022 (excluding accrued and unpaid interest to the redemption date), over the principal amount to be redeemed. On and after July 6, 2022, and prior to July 6, 2023, the notes are redeemable at a price equal to 103% of the principal amount plus accrued and unpaid interest. On and after July 6, 2023, the notes are redeemable at 100% of the principal amount plus accrued and unpaid interest. The Sitka AAC Note is secured by a pledge of AAC’s right, title and interest in (i) up to $1,400 of proceeds from certain litigations involving AAC related to residential mortgage-backed securities (the "RMBS Litigations") and (ii) the capital stock of Ambac UK. Such collateral may prove to be insufficient to pay any or all the amounts due on the Sitka AAC Note due to (a) inherent uncertainty with respect to the amount and timing of recoveries on the RMBS Litigations, and (b) uncertainty with respect to the value of Ambac UK and the amount that could be obtained in a sale or other disposition of such collateral due to factors such as market and economic conditions, the availability of buyers, constraints associated with any extant rehabilitation, liquidation or similar proceeding, and regulatory requirements with respect to a change in ownership of Ambac UK. In addition, AAC issued a financial guaranty insurance policy (the “Sitka Senior Secured Notes Policy”) to the trustee for the Sitka Senior Secured Notes for the benefit of the holders of the Sitka Senior Secured Notes irrevocably guaranteeing all regularly scheduled principal and interest payments in respect of the Sitka Senior Secured Notes as and when such payments become due and owing. Upon receipt of any proceeds from the RMBS Litigations or proceeds from the sale or disposition of Ambac UK, AAC shall apply an amount equal to the lesser of (a) the amount of such proceeds from the RMBS Litigations up to $1,400 or proceeds of the sale or disposition of Ambac UK, as the case may be, and (b) all outstanding principal, premium, if any, and accrued and unpaid interest on the Sitka AAC Note to redeem the Sitka AAC Note, in whole or in part, as applicable; provided, that any non-cash recoveries from the RMBS Litigations shall be deemed to be received upon the receipt of the applicable appraisal. LSNI Ambac Note The LSNI Ambac Note, issued in connection with the Rehabilitation Exit Transactions on February 12, 2018, had a par value of $— and $1,641 at December 31, 2021 and 2020, respectively, and had a legal maturity of February 12, 2023. Interest on the LSNI Ambac Note was payable quarterly (on the last day of each quarter beginning with June 30, 2018) at an annual rate of 3-month U.S. Dollar LIBOR + 5.00%, subject to a 1.00% LIBOR floor. During the years ended December 31, 2021, 2020 and 2019, $1,641, $121 and $178 par value of the LSNI Ambac Note was redeemed, respectively. The maturity date for the LSNI Ambac Note was the earlier of (x) February 12, 2023, and (y) if the LSNI Secured Notes were then outstanding, the date that is five business days prior to the date for which OCI approved the repayment of the outstanding principal amount of the surplus notes issued by AAC. Promptly, and in any event within four business days after the receipt (whether directly or indirectly) of any representation and warranty subrogation recoveries, AAC was to apply an amount (the “Mandatory Redemption Amount”) equal to the lesser of (a) the amount of representation and warranty subrogation recoveries up to $1,400 and (b) all outstanding principal and accrued and unpaid interest on the LSNI Ambac Note to redeem the LSNI Ambac Note, in whole or in part, as applicable; provided, that any non-cash representation and warranty subrogation recoveries shall be deemed to be received upon the receipt of the applicable appraisal. As further described in Note 1. Background and Business Description, on July 6, 2021, Sitka, Ambac's newly formed non-consolidated VIE, issued the Sitka Senior Secured Notes that were used to fund a portion of the full redemption of the LSNI Secured Notes issued by LSNI, with the remaining balance redeemed utilizing other available sources of liquidity. Tier 2 Notes The Tier 2 Notes, issued in connection with the Rehabilitation Exit Transactions on February 12, 2018, with a par value of $333 and $306 (including paid-in-kind interest of $93 and $66) at December 31, 2021 and 2020, respectively, have a legal maturity of February 12, 2055. Interest on the Tier 2 Notes is at an annual rate of 8.50%. Other than upon payment of principal at redemption or maturity, interest payments will not be made in cash on interest payment dates and shall be paid-in-kind and compounded on the last day of each calendar quarter. The Tier 2 Notes were recorded at a discount to par as any consideration paid that was directly related to the issuance of the Tier 2 Notes was capitalized and is part of the effective yield calculation. Ambac accreted the discount on the Tier 2 Notes into earnings using the effective interest method, at an imputed interest rate of 9.9% based on projected redemption at the date of issuance. The discount had been fully accreted as of December 31, 2020. The Tier 2 Notes are secured by recoveries from the RMBS Litigations in excess of $1,600 and are subject to mandatory redemption upon: (i) receipt of recoveries from the RMBS Litigations in excess of $1,600 ("Tier 2 Net Proceeds") and (ii) payment of principal or interest on AAC surplus notes. Promptly, and in any event within five business days after the receipt (whether directly or indirectly) of Tier 2 Net Proceeds, AAC shall deposit an amount equal to the Tier 2 Net Proceeds to a collateral account, provided, that any non-cash recoveries from the RMBS Litigations shall be deemed to be received upon the receipt of the applicable appraisal of the consideration received by AAC. Similarly, within five business days after a surplus note payment (other than in connection with the Rehabilitation Exit Transactions), AAC shall deposit an amount based on the percentage of Surplus Notes paid applied to the outstanding balance of the Tier 2 Notes to a collateral account. In both cases, the amount deposited shall not be in excess of the amount required to redeem all outstanding Tier 2 Notes. Also, such amounts shall be used to initiate a redemption on the Initial Call Date (as defined below) for the Tier 2 Notes or, if the Initial Call Date has occurred, promptly following the receipt of the Tier 2 Net Proceeds or surplus note payment. The Tier 2 Notes may also be redeemed, in whole or in part, at the option of AAC. Both mandatory and optional redemptions may be made at a price equal to 100% of the aggregate principal amount redeemed, plus accrued and unpaid interest, if any, plus a make-whole premium. Make-whole premiums are calculated based on future interest payments through the contractual call date ("Initial Call Date"). The Initial Call Date at issuance of December 17, 2020 extends ratably beginning the first anniversary of issuance to (i) September 17, 2021 by the second anniversary, and (ii) March 17, 2022 by the third anniversary of issuance. There are no extensions of the Initial Call Date beyond March 17, 2022. The Initial Call Date for redemptions is determined based on the date the applicable amounts are deposited to the collateral account. Ambac UK Debt The Ambac UK debt, issued in connection with the commutation of its exposure with respect to Ballantyne Re plc on June 18, 2019, has a par value of $41 and $41 at December 31, 2021 and 2020, and a legal maturity of May 2, 2036. Interest on the Ambac UK debt is at an annual rate of 0.00%. The Ambac UK debt was recorded at its fair value at the date of issuance. The discount on the debt is currently being accreted into income using the effective interest method at an imputed interest rate of 7.4%. Variable Interest Entities, Long-term Debt The variable interest entity notes were issued by consolidated VIEs. Ambac is the primary beneficiary of the VIEs as a result of providing financial guarantees on certain of the VIEs obligations. Consequently, Ambac has consolidated these variable interest entity notes and all other assets and liabilities of the VIEs. Ambac is not primarily liable for the debt obligations of these entities. Ambac would only be required to make payments on these debt obligations in the event that the issuer defaults on any principal or interest due and to the extent such obligations are guaranteed by Ambac. The total unpaid principal amount of outstanding long-term debt associated with VIEs consolidated as a result of the financial guarantee provided by Ambac was $3,739 and $3,927 as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the ranges of final maturity dates of the outstanding long-term debt associated with these VIEs were December 2025 to August 2054 and December 2025 to August 2054, respectively. As of December 31, 2021 and 2020, the interest rates on these VIEs’ long-term debt ranged from 0.00% to 7.93% in both years. Aggregated annual maturities of VIE long-term debt following December 31, 2021 are: 2022-$0; 2023-$0; 2024-$0; 2025-$56; 2026-$0; Thereafter-$3,683.

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