Ambac Announces Capital Enhancement Plan to Raise in Excess of $1 Billion
16 Gennaio 2008 - 2:00PM
Business Wire
Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced
that its Board of Directors has approved a plan to strengthen its
capital base through the issuance of at least $1 billion of equity
and equity-linked securities. This plan may also include additional
capital from reinsurance or issuance of debt securities. Ambac said
that it is committed to maintaining its triple-A financial
strength. By raising at least $1 billion in capital, Ambac is
expected to meet or exceed Fitch Ratings� current triple-A capital
requirements for the Company. The Company noted that its existing
capital position currently meets or exceeds the triple-A capital
requirements of both S&P and Moody�s. As part of its capital
initiative, Ambac also said that it will reduce the quarterly
dividend on its common stock from $0.21 per share to $0.07 per
share. Management Change Ambac�s Board of Directors announced today
that it has named Michael A. Callen as Chairman and Interim Chief
Executive Officer. Mr. Callen has been Presiding Director and a
member of the Audit and Risk Assessment; Compensation; and
Governance committees of Ambac�s Board of Directors. He succeeds
Robert J. Genader, who will retire from the Company effective
today. �Mike has extensive experience in advising and leading
companies engaged in sophisticated capital markets transactions,
and he will provide valuable leadership to the excellent management
team at Ambac,� said Jill Considine, Chairman of the Board�s
Governance Committee. Ms. Considine commented further, �On behalf
of the Board and everyone at Ambac, I would like to thank Bob
Genader for his more than 20 years of dedication to Ambac. He has
served the Company in almost every capacity throughout his long
career, and has been a true asset. Indeed, one of the most
important testaments to his leadership is the highly-qualified
management team currently at Ambac. We wish him well in his
retirement.� Mr. Callen said, �We have great confidence in our plan
to enhance Ambac�s capital position by over $1 billion within an
accelerated time frame. We are optimistic about the long-term
business opportunities ahead for Ambac, even as we respond to the
volatility in the present credit market. We expect that our
experienced management team, significant size and scale, and
expertise in growing market sectors such as global infrastructure
finance will help us tap the potential of the market today and into
the future.� Mr. Callen also stated that the Company has been
working with Credit Suisse as its financial adviser. Mark-to-market
and Losses The Company also announced the results of its fourth
quarter fair value review of its outstanding credit derivative
contracts. Ambac�s estimate of the fair value or �mark-to-market�
adjustment for its credit derivative portfolio for the quarter
ended December 31, 2007 amounted to an estimated loss of $5.4
billion, pre-tax, $3.5 billion, after tax. Of the estimated $5.4
billion pre-tax mark-to-market loss, approximately $1.1 billion
represents estimated credit impairment related to certain
collateralized debt obligations of asset-backed securities
transactions. These transactions are backed primarily by mezzanine
level subprime residential mortgage-backed securities that have
been internally downgraded to below investment grade. Ambac
continues to believe that the balance of the mark-to-market losses
taken to date are not predictive of future claims and that, in the
absence of further credit impairment, the cumulative marks would be
expected to reverse over the remaining life of the insured
transactions. Ambac also expects to report a loss provision
amounting to approximately $143 million, pre-tax. The loss
provision relates primarily to underperforming home equity line of
credit and closed-end second lien RMBS securitizations. As a result
of the aforementioned losses, Ambac expects to report a net loss
per share of up to $32.83 for the fourth quarter ended December 31,
2007. Earnings measures reported by research analysts are on an
operating basis and exclude the net income impact of mark-to-market
gains and losses on credit derivative contracts internally rated
investment grade, as well as certain other items. Ambac expects to
report operating losses(1) per share of up to $5.80 for the fourth
quarter primarily as a result of the aforementioned losses on CDOs
and home equity line of credit transactions. In addition, book
value per share is expected to be approximately $21.00 per share at
December 31, 2007. Michael A. Callen Mr. Callen has been a member
of the Board since Ambac went public in 1991. He spent more than 25
years at Citigroup and was a director and Sector Executive for
Citicorp from 1987 to 1992. Since 1996, Mr. Callen has been
President of financial consulting firm, Avalon Argus Associates,
LLC. He was Special Advisor to the National Commercial Bank located
in Jeddah in the Kingdom of Saudi Arabia from 1993 to 1996. He has
been an independent consultant and an Adjunct Professor at Columbia
University Business School and at Georgetown�s Masters of Science
in Foreign Services program. Mr. Callen also serves as a director
of Intervest Corporation of New York and Intervest Bancshares
Corporation. Ambac said that, consistent with NYSE requirements and
corporate governance best practices, upon assuming his new
responsibilities as Chairman of the Board and interim Chief
Executive Officer, Mr. Callen will no longer serve as a member of
the Audit and Risk Assessment, Compensation and Governance
Committees. W. Grant Gregory The Company also said that on January
13, 2008, W. Grant Gregory resigned from the Board of Directors of
Ambac and Ambac Assurance Corporation in order to concentrate on
his professional responsibilities as the President of Cerberus
Operations and Advisory Company, LLC., an affiliate of Cerberus
Capital Management, L.P. �On behalf of the Board of Directors of
Ambac, we understand that Grant has many responsibilities at
Cerberus, and we will miss the dedication and insight that he
brought to the Board,� commented Mr. Callen. Fourth Quarter
Earnings Release and Conference Call Ambac will move the reporting
of its fourth quarter results to Tuesday, January 22, 2008 at 6:00
a.m. (ET), from the originally scheduled date of Wednesday, January
30, 2008. Messrs. Callen and Sean Leonard, Chief Financial Officer,
will host a conference call that day at 10:00 a.m. (ET) to discuss
the financial results and the status of Ambac�s capital expansion
plan. The call in number to listen in is 877-407-0778 (U.S.) and
201-689-8565 (outside the U.S.). The conference call will also be
webcast live at www.ambac.com. Ambac is providing this preliminary
information about its fourth quarter results prior to the scheduled
earnings announcement date in light of market events of recent
months and the management change. Investors should not expect Ambac
to provide information about the results of future quarters in
advance of scheduled quarterly earnings announcement dates. In
addition, investors should not expect Ambac to update the
information provided in this release in advance of the scheduled
announcement date for its fourth quarter. Forward-Looking
Statements This release contains statements about our future
results that may constitute �forward-looking statements� within the
meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are based on
management�s current expectations and are subject to uncertainty
and changes in circumstances. Actual results may differ materially
from those included in these statements due to a variety of
factors. More information about these factors is contained in
Ambac�s filings with the Securities and Exchange Commission. There
are a variety of factors, many of which are beyond Ambac�s control,
which affect the operations, performance, business strategy and
results and could cause its actual results to differ materially
from the expectations and objectives expressed in any
forward-looking statements. Readers are cautioned not to place
undue reliance on forward-looking statements which speak only as of
the date they are made. Ambac does not undertake to update
forward-looking statements to reflect the impact of circumstances
or events that arise after the date the forward-looking statements
are made. The reader should, however, consult any further
disclosures Ambac may make in its future filings of its reports on
Form 10-K, Form 10-Q and Form 8-K. Ambac may also, from time to
time, disclose financial information on a non-GAAP basis where
management believes this information is valuable to investors in
gauging the quality of Ambac�s financial performance and
identifying trends. Ambac may file a registration statement
(including a prospectus) and prospectus supplements with the
Securities and Exchange Commission for the potential offerings of
equity and equity-linked securities to which this communication
relates. Before you invest, you should read the prospectus in that
registration statement, the prospectus supplement relating to the
applicable offering and any other documents that Ambac has filed
with the SEC for more complete information about Ambac and the
applicable offering. You may get these documents for free by
visiting EDGAR on the SEC Web site at www.sec.gov . Alternatively,
Ambac will arrange to send you the prospectus and the applicable
prospectus supplement after filing if you request it by calling
toll-free 1-800-221-1854, or by emailing Peter Poillon of Ambac's
Investor Relations at ppoillon@ambac.com. Ambac Financial Group,
Inc., headquartered in New York City, is a holding company whose
affiliates provide financial guarantees and financial services to
clients in both the public and private sectors around the world.
Ambac�s principal operating subsidiary, Ambac Assurance
Corporation, a leading guarantor of public finance and structured
finance obligations, has earned triple-A ratings from Moody�s
Investors Service, Inc., Standard & Poor�s Ratings Services and
Fitch, Inc. Standard & Poor�s has placed Ambac�s triple-A
rating on �negative outlook.� Fitch has placed Ambac's triple-A
rating on �rating watch negative.� Ambac Financial Group, Inc.
common stock is listed on the New York Stock Exchange (ticker
symbol ABK). (1) Operating earnings is not a substitute for net
income computed in accordance with GAAP, but is a useful measure of
performance used by management, equity analysts and investors
because it allows more consistent period-to-period comparison of
our earnings without the effects of our credit derivative
mark-to-market adjustments discussed in this press release and
other adjustments. Operating earnings measures income from
operations excluding the impact of investment portfolio realized
gains and losses, mark-to-market gains and losses on credit, total
return and non-trading derivative contracts and certain other items
(collectively �net security gains and losses�). The definition of
operating earnings used by Ambac may differ from definitions of
operating earnings used by other public holding companies of
financial guarantors. The following reconciles estimated GAAP net
loss per share to estimated operating loss per share for the fourth
quarter of 2007: Estimated Fourth Quarter 2007 Net loss per share
($32.83) Effect of net security losses $34.06 Less impairment
losses ($7.03) Operating loss per share ($5.80)
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