Ambac Adopts Rights Plan Designed to Protect Use of Net Operating Losses
03 Febbraio 2010 - 3:27PM
Business Wire
Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) announced
today that it has adopted a tax benefit preservation shareholder
rights plan (“rights plan”), effective today, designed to protect
Ambac’s valuable federal net operating losses (NOLs) under Section
382 of the Internal Revenue Code.
As of September 30, 2009, Ambac had NOLs amounting to
approximately $4.5 billion. Ambac can utilize these tax attributes
in certain circumstances to offset future U.S. taxable income and
reduce its U.S. federal income tax liability, which may arise even
in periods when Ambac incurs an accounting loss for reporting
purposes. However, Ambac’s ability to use its NOLs could be
substantially limited if there were an “ownership change” as
defined under Section 382 of the Internal Revenue Code. In general,
an ownership change would occur if certain ownership changes
related to Ambac’s stock held by 5% or greater shareholders
exceeded 50%, measured over a rolling up to three year period
beginning with the last ownership change. These provisions can be
triggered not only by merger and acquisition activity, but by
normal market trading as well. The rights plan is designed to deter
trading that would lead to the loss of Ambac’s valuable NOLs and
the resulting reduction in shareholder value.
David Trick, Chief Financial Officer, commented, “This rights
plan has been structured and approved by the Board solely to
protect all shareholders from the possibility of losing an
important and valuable asset of the Company. It has a limited life
and is not intended for defensive or anti-takeover purposes.”
Under Ambac’s rights plan, when a person or group has obtained
beneficial ownership of 4.9% or more of Ambac’s common stock, or an
existing holder (as of February 2, 2010) with greater than 4.9%
ownership acquires more shares representing an additional 1.0% of
Ambac’s common stock, there would be a triggering event causing
significant dilution in the economic interest and voting power of
such person or group.
Ambac’s Board of Directors has the discretion to exempt an
acquisition of common stock from the provisions of the rights plan
if it determines that the acquisition will not jeopardize tax
benefits or is otherwise in Ambac’s best interests. The rights plan
was adopted with the sole intent of preserving Ambac’s tax
attributes, and not with the goal of deterring any strategic
transactions. The Board of Directors remains open to considering
all alternatives to maximize stockholder value.
The rights plan will be limited in life, expiring upon the
earlier to occur of (1) Ambac’s Board of Directors’ determination
that the rights plan is no longer needed for the preservation of
Ambac’s tax attributes; (2) (i) February 2, 2011, if the plan has
not been approved by a majority of Ambac’s shareholders, or (ii)
February 2, 2013, if shareholder approval is obtained; or (3)
certain other events described in the rights plan. The plan may be
terminated by the Board of Directors at any time prior to the
preferred share purchase rights being triggered.
For purposes of the plan, beneficial owners of purchase
contracts issued in connection with our outstanding equity units
will be deemed to beneficially own the shares of common stock that
are subject to such purchase contract.
Additional information regarding the tax benefit preservation
rights plan will be contained in a Form 8-K and in a Registration
Statement on Form 8-A that Ambac is filing with the Securities and
Exchange Commission today.
About Ambac
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 guarantor of public finance and
structured finance obligations, has a Caa2 rating (developing
outlook) from Moody’s Investors Service, Inc. and a CC rating
(outlook developing) from Standard & Poor’s Ratings
Services. Ambac Financial Group, Inc. common stock is listed on the
New York Stock Exchange (ticker symbol ABK).
Forward-Looking Statements
This release contains statements that may constitute
“forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Any or all of management’s forward-looking statements here or in
other publications may turn out to be wrong and are based on
Ambac’s management 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) Ambac’s liquidity is currently
insufficient to fund its needs beyond the near term and failure to
successfully execute on its current strategies could result in it
running out of liquidity; (2) as a result of Ambac Assurance’s
deteriorating financial condition, regulators could commence
delinquency proceedings; (3) difficult economic conditions,
which may not improve in the near future, and adverse changes in
the economic, credit, foreign currency or interest rate environment
in the United States and abroad; (4) the actions of the U. S.
Government, Federal Reserve and other government and regulatory
bodies to stabilize the financial markets; (5) the risk that
market risks impact assets in our investment portfolio or the value
of our assets posted as collateral in respect of investment
agreements and interest rate swap and currency swap transactions;
(6) market spreads and pricing on insured CDOs and other
derivative products insured or issued by Ambac; (7) the risk
that holders of debt securities or counterparties on credit default
swaps or other similar agreements seek to declare events of default
or seek judicial relief or bring claims alleging violation or
breach of covenants by Ambac or one of its subsidiaries;
(8) default by one or more of Ambac Assurance’s portfolio
investments, insured issuers, counterparties or reinsurers;
(9) inadequacy of reserves established for losses and loss
expenses; (10) changes in capital requirements whether
resulting from downgrades in our insured portfolio or changes in
rating agencies’ rating criteria or other reasons; (11) the
risk that we may be required to raise additional capital, which
could have a dilutive effect on our outstanding equity capital
and/or future earnings; (12) our ability or inability to raise
additional capital, including the risks that regulatory or other
approvals for any plan to raise capital are not obtained, or that
various conditions to such a plan, either imposed by third parties
or imposed by Ambac or its Board of Directors, are not satisfied
and thus potentially necessary capital raising transactions do not
occur, or the risk that for other reasons the Company cannot
accomplish any potentially necessary capital raising transactions;
(13) credit risk throughout our business, including credit
risk related to residential mortgage-backed securities and
collateralized debt obligations (“CDOs”) and large single exposures
to reinsurers; (14) changes in Ambac’s and/or Ambac
Assurance’s credit or financial strength ratings; (15) risks
relating to the re-launch of Connie Lee as Everspan Financial
Guarantee Corp.; (16) competitive conditions, pricing levels
and reduction in demand for financial guarantee products;
(17) credit and liquidity risks due to unscheduled and
unanticipated withdrawals on investment agreements;
(18) legislative and regulatory developments, including the
Troubled Asset Relief Program and other programs under the
Emergency Economic Stabilization Act and other similar programs;
(19) changes in accounting principles or practices relating to
the financial guarantee industry or that may impact Ambac’s
reported financial results; (20) the risk of volatility in
income and earnings, including volatility due to the application of
fair value accounting, required under ASC Topic 815, to the portion
of our credit enhancement business which is executed in credit
derivative form, and due to the adoption of ASC Topic 944, which,
among other things, introduces volatility in the recognition of
premium earnings and losses; (21) the risk that our
underwriting and risk management policies and practices do not
anticipate certain risks and/or the magnitude of potential for loss
as a result of unforeseen risks; (22) operational risks,
including with respect to internal processes, risk models, systems
and employees; (23) factors that may influence the amount of
installment premiums paid to Ambac; (24) 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 our business, operations, financial
position, profitability or cash flows; (25) the risk that
reinsurers may dispute amounts owed us under our reinsurance
agreements; (26) changes in tax laws; (27) other factors
described in the Risk Factors section in Part I, Item 1A of
our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008 and also disclosed from time to time by
Ambac in its subsequent reports on Form 10-Q and Form 8-K, which
are or will be available on the Ambac website at www.ambac.com and
at the SEC’s website, www.sec.gov; and (28) other risks and
uncertainties that have not been identified at this time. Readers
are cautioned that forward-looking statements speak only as of the
date they are made and that Ambac does not undertake to update
forward-looking statements to reflect circumstances or events that
arise after the date the statements are made. You are therefore
advised to consult any further disclosures we make on related
subjects in Ambac’s reports to the SEC.
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