First Amended Plan. The Original Plan and all supplements and Exhibits thereto, as amended by the 2014 Amendments.
First Amended Plan. Following the Confirmation Order but before the First Plan became effective, a number of potential tax issues arose from the First Plan as originally confirmed, including: (i) the potential deconsolidation of AAC from the AFG consolidated tax group for U.S. federal income tax purposes would result if the SA SSNs that were to be issued were treated as equity rather than debt for U.S. federal income tax purposes; (ii) the imposition of original issue discount treatment on holders of those SA SSNs; and (iii) AAC’s recognition of significant ordinary income as a result of satisfying permitted policy claims with SA SSNs treated as issued with original issue discount. The Rehabilitator, AAC and AFG took three major actions to mitigate those tax issues and to achieve more certainty regarding the tax consequences of the First Plan. First, OCI and the Rehabilitator reached an agreement with AAC, AFG and the Official Committee of Unsecured Creditors of Ambac Financial Group, Inc.1 (the “AFG Settlement”), which resolved all outstanding tax and expense-related issues between AFG and AAC and which, among other things, allocated certain net operating losses (“NOLs”) generated by the AFG consolidated tax group prior to September 30, 2011 to AAC and provided for AAC to compensate AFG for use of such NOLs above a defined threshold. The AFG Settlement is described in more detail in the motion papers relating thereto available on the Website and in the 2012 Annual Report. Second, the Rehabilitator and AFG sought a private letter ruling (the “PLR”) from the Internal Revenue Service (the “IRS”) to the effect that: (i) neither the appointment of the Rehabilitator nor the First Amendments (as defined below) requiring the cash payments and establishing Deferred Amounts would result in a disaffiliation of AAC from AFG for federal tax purposes; (ii) policies allocated to the Segregated Account would continue to be treated as insurance contracts for federal tax purposes; and (iii) the obligations to pay both cash payments and Deferred Amounts are taken into account in computing “losses incurred” for federal tax purposes. On March 12, 2014, the IRS issued a favorable PLR with respect to all three issues. Third, in resolution of various potential tax issues arising from the First Plan as originally confirmed, on April 21, 2014, the Rehabilitator filed proposed amendments to the First Plan, modifying the form of distribution to holders of permitted claims under the First Plan (the “Fir...
