Exclusive: Some Ambac shareholders call on CEO to quit, cite delays in paying claims - sources

Wed Jan 13, 2016 6:36pm EST
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By Mike Stone and Greg Roumeliotis

NEW YORK (Reuters) - Three of Ambac Financial Group Inc's (AMBC.O: Quote) top ten shareholders are calling on its new CEO Nader Tavakoli to step down, according to people familiar with the matter. One of the reasons they give is that he is slow to settle $4 billion in insurance claims in which at least two of them have an interest, the sources said.

The policy claims relate to complex financial instruments, including secured mortgage backed securities, that were insured by Ambac and were at the center of the 2008 financial crisis. It is unclear what portion of the claims have been acquired by the shareholders or what they paid for them. The sources asked that the names of the shareholders, who have communicated with the company verbally and through at least one letter, not be identified.

In the past, the policy claims have traded as low as 20 cents on the dollar. They currently trade at close to 80 cents, but it is far from clear whether that market could withstand any substantial trading without pushing prices lower. The shareholders point out that Ambac bought back some claims as recently as last June for more than 90 cents on the dollar, and argue the company should do so again.

Ambac spokeswoman Abbe Goldstein said that "the vast majority of shareholders” it had talked to support the board’s decision to appoint Tavakoli. Tavakoli, who was named CEO earlier this month after serving as interim CEO for a year, declined to comment.

The spat represents one of the biggest challenges the bond insurer has faced since it emerged from bankruptcy in 2013. It is a shadow of its former self as a result of getting badly roiled in the 2008 financial crisis, and is currently worth just $552 million, down from $1.6 billion two years ago and around $10 billion in 2007.   Continued...

The Ambac building at One State Street Plaza is seen in New York March 5, 2008. REUTERS/Joshua Lott