NEW YORK (Bloomberg) — The bond insurance unit of Bermuda-based Syncora Holdings Ltd., ordered by regulators to restore a capital surplus, reached an agreement with 25 firms to restructure $56 billion in credit-default swaps.

Syncora, formerly known as Security Capital Assurance Ltd., would terminate about $15 billion of credit swaps that guarantee mortgage-related securities and other debt, according to a statement by Syncora. The insurer would pay $1.2 billion in cash and transfer 40 percent of its outstanding common shares to the banks and other firms to which the insurer sold the insurance-like derivatives. The contracts plunged in value amid the US housing crisis, eroding capital.

If the agreement reached with the banks isn't completed, the New York insurance regulator could place Syncora into rehabilitation or liquidation, according to the statement, requiring it to pay more than $15 billion in termination payments on the credit swaps.

The amount "would significantly exceed its ability to make such payments", the company said in the statement.

The accord with its credit-swap counterparties also calls for the remaining $40 billion of contracts to be transferred to a new company called Syncora Capital Assurance Inc.

Syncora last month stopped paying claims after the order from the state insurance department.