Ambac Financial Group, Inc. (Nasdaq: AMBC) (“AFG”), a holding
company whose subsidiaries, including Ambac Assurance Corporation
(“AAC” and together with AFG, “Ambac”), provide financial
guarantees, successfully completed Ambac’s previously-announced
offer to exchange (the “Exchange Offer”) AAC’s outstanding Auction
Market Preferred Shares (“AMPS”) for AAC’s 5.1% senior surplus
notes due 2020 (the “Senior Surplus Notes”) and, from AFG, cash and
warrants to purchase AFG common stock.
The Exchange Offer expired on August 1, 2018, at 5:00 p.m., New
York City time, with an aggregate of 84.4% of AMPS having been
tendered.
Claude LeBlanc, President and Chief Executive Officer of Ambac,
commented: “The closing of the Exchange Offer furthers our
commitment to de-leveraging and simplifying our capital structure.
The execution of this transaction has allowed us to capture a
significant discount, will improve the quality of book value and
further enhance shareholder value.”
In exchange for each $25,000 of liquidation preference (i.e.,
per share):
- AMPS holders who tendered received from AAC Senior Surplus
Notes with a total outstanding amount (including accrued and unpaid
interest thereon through June 22, 2018) equal to $13,875 (the
“Repurchase”). As of August 2, 2018, the total outstanding
amount of these Senior Surplus Notes (including accrued interest
from June 23, 2018 through August 2, 2018) was $13,953.
- AMPS holders who tendered before July 17, 2018, representing
22,096 of the outstanding AMPS, received from AFG $500 in cash and
37.3076 warrants (rounded down to the nearest whole warrant) to
purchase an equivalent number of shares of AFG common stock at an
exercise price of $16.67 per share (the “AFG Purchase” and,
together with the Repurchase, the “Purchases”).
As a result of the completion of the Purchases, Ambac:
- Repurchased 22,296 AMPS with an aggregate liquidation
preference of $557,400,000, including $34,650,000 in aggregate
liquidation preference in the AFG Purchase; and
- Captured a nominal discount of approximately $227,000,000 (a
discount of approximately $252,000,000 on a fair market value
basis) on $557,400,000 of the total outstanding liquidation
preference of AMPS, significantly de-leveraging Ambac’s capital
structure and providing for enhanced financial and strategic
flexibility going forward, in addition to other material
benefits. The fair market value basis was determined based on
the fair value of warrants ($9.72 per warrant) and Senior Surplus
Notes (92.0% of principal and interest) on August 1,
2018.
- Issued, in aggregate, $212,739,997 in current principal amount
of surplus notes with accrued interest thereon of $96,616,951,
issued 824,307 warrants and paid $11,048,000 in cash.
About Ambac
Ambac Financial Group, Inc. (“Ambac” or “AFG”), headquartered in
New York City, is a holding company whose subsidiaries, including
its principal operating subsidiaries, Ambac Assurance Corporation
(“AAC”), Everspan Financial Guarantee Corp. and Ambac Assurance UK
Limited (“Ambac UK”), provide financial guarantees of obligations
in both the public and private sectors globally. AAC is a guarantor
of public finance and structured finance obligations. Ambac’s
common stock trades on the NASDAQ Global Select Market under the
symbol “AMBC”. The Amended and Restated Certificate of
Incorporation of Ambac contains substantial restrictions on the
ability to transfer Ambac’s common stock. Subject to limited
exceptions, any attempted transfer of common stock shall be
prohibited and void to the extent that, as a result of such
transfer (or any series of transfers of which such transfer is a
part), any person or group of persons shall become a holder of 5%
or more of Ambac’s common stock or a holder of 5% or more of
Ambac’s common stock increases its ownership interest. Ambac is
committed to providing timely and accurate information to the
investing public, consistent with our legal and regulatory
obligations. To that end, we use our website to convey information
about our businesses, including the anticipated release of
quarterly financial results, quarterly financial, statistical and
business-related information, and the posting of updates to the
status of certain residential mortgage backed securities
litigations. For more information, please go to
www.ambac.com.
Contact:
Lisa A. KampfManaging Director, Investor Relations(212)
208-3177lkampf@ambac.com
Important Information and Forward Looking
Statements
This press release is not an offer to exchange or a solicitation
or acceptance of an offer to exchange any securities, which may be
made only pursuant to the terms and conditions of an offering
memorandum, nor is this press release an offer to buy or a
solicitation or acceptance of an offer to buy any securities. In
addition, this press release is not a solicitation of any proxies
from holders of AMPS. The Exchange Offer and Proxy Solicitation are
being made and are subject to the terms and conditions set forth in
the Offering Memorandum and related Letter of Transmittal and
Proxy.
The Exchange Offer and the offer of the Senior Surplus Notes and
warrants have not been registered under the Securities Act or any
other applicable securities laws and, unless so registered, such
Senior Surplus Notes and warrants may not be offered, sold, pledged
or otherwise transferred within the United States or to or for the
account of any U.S. person, except pursuant to an exemption from,
or in a transaction not subject to, the registration requirements
of the Securities Act and any other applicable securities
laws. The Exchange Offer is being made to, the Proxies are
being solicited from and Senior Surplus Notes and warrants are
being offered to only (a) in the United States, holders of AMPS who
are QIBs or Institutional Accredited Investors and (b) outside the
United States, holders of AMPS who are not “U.S. persons” (as
defined in Rule 902 under the Securities Act) in reliance on
Regulation S of the Securities Act. The Senior Surplus Notes
have not been registered under the Securities Act or under any
state securities laws, and may not be offered or sold in the United
States absent registration or an applicable exemption from the
registration requirements of the Securities Act, and accordingly,
are subject to significant restrictions on transfer and resale as
more fully described in the Offering Memorandum and the Letter of
Transmittal and Proxy.
None of the AAC, AFG, their respective boards of directors, the
dealer manager, the information and exchange agent, the fiscal
agent for the Senior Surplus Notes or the warrant agent for the
warrants is making any recommendation as to whether holders should
tender AMPS in response to the Exchange Offer or provide their
Proxy in the Proxy Solicitation. Holders must make their own
decisions as to whether to tender AMPS or provide their Proxy.
In this press release, statements that may constitute
“forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Words such as “estimate,” “project,” “plan,” “believe,”
“anticipate,” “intend,” “planned,” “potential” and similar
expressions, or future or conditional verbs such as “will,”
“should,” “would,” “could,” and “may,” or the negative of those
expressions or verbs, identify forward-looking statements. We
caution readers that these statements are not guarantees of future
performance. Forward-looking statements are not historical facts
but instead represent only our beliefs regarding future events,
which may by their nature be inherently uncertain and some of which
may be outside our control. These statements may relate to plans
and objectives with respect to the future, among other things which
may change. We are alerting you to the possibility that our actual
results may differ, possibly materially, from the expected
objectives or anticipated results that may be suggested, expressed
or implied by these forward-looking statements. Important factors
that could cause our results to differ, possibly materially, from
those indicated in the forward-looking statements include, among
others, those discussed under “Risk Factors” in our most recent SEC
filed quarterly or annual report.
Any or all of management’s forward-looking statements here or in
other publications may turn out to be incorrect and are based on
management’s current belief or opinions. Ambac’s actual
results may vary materially, and there are no guarantees about the
performance of Ambac’s securities. Among events, risks,
uncertainties or factors that could cause actual results to differ
materially are: (1) the highly speculative nature of Ambac’s common
stock and volatility in the price of Ambac’s common stock; (2)
uncertainty concerning the Company’s ability to achieve value for
holders of its securities, whether from Ambac Assurance Corporation
("Ambac Assurance") or from transactions or opportunities apart
from Ambac Assurance; (3) adverse effects on Ambac’s share price
resulting from future offerings of debt or equity securities that
rank senior to Ambac’s common stock; (4) potential of
rehabilitation proceedings against Ambac Assurance; (5) dilution of
current shareholder value or adverse effects on Ambac’s share price
resulting from the issuance of additional shares of common stock;
(6) inadequacy of reserves established for losses and loss expenses
and possibility that changes in loss reserves may result in further
volatility of earnings or financial results; (7) decisions made by
Ambac Assurance's primary insurance regulator for the benefit of
policyholders that may result in material adverse consequences for
holders of the Company’s securities or holders of securities issued
or insured by Ambac Assurance; (8) increased fiscal stress
experienced by issuers of public finance obligations or an
increased incidence of Chapter 9 filings or other restructuring
proceedings by public finance issuers; (9) failure to recover
claims paid on Puerto Rico exposures or incurrence of losses in
amounts higher than expected; (10) the Company’s inability to
realize the expected recoveries included in its financial
statements; (11) changes in Ambac Assurance’s estimated
representation and warranty recoveries or loss reserves over time;
(12) insufficiency or unavailability of collateral to pay
secured obligations; (13) credit risk throughout the Company’s
business, including but not limited to credit risk related to
residential mortgage-backed securities, student loan and other
asset securitizations, public finance obligations and exposures to
reinsurers; (14) credit risks related to large single risks, risk
concentrations and correlated risks; (15) concentration and
essentiality risk in connection with Military Housing insured debt;
(16) the risk that the Company’s risk management policies and
practices do not anticipate certain risks and/or the magnitude of
potential for loss; (17) risks associated with adverse selection as
the Company’s insured portfolio runs off; (18) adverse effects on
operating results or the Company’s financial position resulting
from measures taken to reduce risks in its insured portfolio; (19)
intercompany disputes or disputes with Ambac Assurance's primary
insurance regulator; (20) our inability to mitigate or remediate
losses, commute or reduce insured exposures or achieve recoveries
or investment objectives, or the failure of any transaction
intended to accomplish one or more of these objectives to deliver
anticipated results; (21) the Company’s substantial indebtedness
could adversely affect its financial condition and operating
flexibility; (22) the Company may not be able to obtain financing
or raise capital on acceptable terms or at all due to its
substantial indebtedness and financial condition; (23) the Company
may not be able to generate the significant amount of cash needed
to service its debt and financial obligations, and may not be able
to refinance its indebtedness; (24) restrictive covenants in
agreements and instruments may impair the Company’s ability to
pursue or achieve its business strategies; (25) loss of control
rights in transactions for which we provide insurance due to a
finding that Ambac Assurance has defaulted, whether due to the
Segregated Account rehabilitation proceedings or otherwise; (26)
the Company’s results of operation may be adversely affected by
events or circumstances that result in the accelerated amortization
of the Company’s insurance intangible asset; (27) adverse tax
consequences or other costs resulting from the Segregated Account
rehabilitation plan, or from the characterization of the Company’s
surplus notes or other obligations as equity; (28) risks attendant
to the change in composition of securities in the Company’s
investment portfolio; (29) changes in tax law; (30) changes in
prevailing interest rates; (31) changes on inter-bank lending rate
reporting practices or the method pursuant to which LIBOR rates are
determined; (32) factors that may influence the amount of
installment premiums paid to the Company, including the Segregated
Account rehabilitation proceedings; (33) default by one or more of
Ambac Assurance's portfolio investments, insured issuers or
counterparties; (34) market risks impacting assets in the Company’s
investment portfolio or the value of our assets posted as
collateral in respect of interest rate swap transactions; (35)
risks relating to determinations of amounts of impairments taken on
investments; (36) the risk of litigation and regulatory inquiries
or investigations, and the risk of adverse outcomes in connection
therewith, which could have a material adverse effect on the
Company’s business, operations, financial position, profitability
or cash flows; (37) actions of stakeholders whose interests are not
aligned with broader interests of the Company's stockholders; (38)
the Company’s inability to realize value from Ambac UK or other
subsidiaries of Ambac Assurance; (39) system security risks; (40)
market spreads and pricing on interest rate derivative insured or
issued by the Company; (41) the risk of volatility in income and
earnings, including volatility due to the application of fair value
accounting; (42) changes in accounting principles or practices that
may impact the Company’s reported financial results; (43)
legislative and regulatory developments, including intervention by
regulatory authorities; (44) the economic impact of “Brexit” may
have an adverse effect on the Company’s insured international
portfolio and the value of its foreign investments, both of which
primarily reside with its subsidiary Ambac UK; (45) operational
risks, including with respect to internal processes, risk and
investment models, systems and employees, and failures in services
or products provided by third parties; (46) the Company’s financial
position that may prompt departures of key employees and may impact
the Company’s ability to attract qualified executives and
employees; (47) implementation of new tax legislation signed into
law on December 22, 2017 (commonly known as the “Tax Cuts and Jobs
Act”) may have unexpected consequences for the Company and the
value of its securities, particularly its common shares; (48)
implementation of the Tax Cuts and Jobs Act may negatively impact
the economic recovery of Puerto Rico, which could result in higher
loss severities or an extended moratorium on debt service owed on
Ambac Assurance-insured bonds of Puerto Rico and its
instrumentalities; (49) implementation of the Tax Cuts and Jobs Act
could have a negative impact on municipal issuers of Ambac-insured
bonds; and (50) other risks and uncertainties that have not been
identified at this time.
Source: Ambac Financial Group
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