According to a recent report in the Boston Globe, an affiliate of the New England Patriots has filed suit against its bond insurer, AMBAC, in an attempt to avoid $2.8 million in accelerated premium payments linked to the troubled auction rate securities (“ARS”) market.
NPS, a Patriot’s affiliate, reportedly issued bonds to fund the building of the new home of the Patriots, Gillette Stadium. When the auction rate securities market deteriorated in February 2008, however, NPS potentially faced paying an additional $44 million a year in interest payments on the bonds. NPS subsequently refinanced the bonds, but AMBAC has reportedly asserted that NPS owes $2.8 million in accelerated premium payments. NPS’s suit, filed in Massachusetts state court, reportedly seeks to avoid those payments on the basis that AMBAC’s own decision to insure riskier debts caused the events that required NPS to refinance.