NEW YORK, Dec. 30, 2015 /PRNewswire/ --
Members of the Board of Directors
c/o Jeffrey Stein, Chairman of Board of Directors
c/o Nader Tavakoli, Interim President and Chief Executive Officer
Ambac Financial Group, Inc.
One State Street Plaza
New York, NY 10004
Dear Board Members:
I am a shareholder of Ambac Financial Group, Inc. I am writing this letter because I am deeply concerned that members of the Board of Ambac are inherently conflicted in their responsibilities and are potentially neglecting their fiduciary duties to shareholders. I believe the conflicts arise from the fact that several members of the current Board were appointed by the creditors of Ambac almost three years ago. At the time, the company was in bankruptcy and it made sense for creditors to get board representation as they received equity in the reorganized company. Since then, equity ownership has changed and most of those creditors no longer hold equity positions but some are still in fact creditors of the company through ownership of deferred payment obligations and surplus notes.
The Company has been in negotiations with these same creditors for some time over a recapitalization of Ambac Assurance Corp (AAC) as described in the Company's latest quarterly filing. It was recently reported that an ad hoc group of creditors, including Carval, Canyon, and Davidson Kempner, have ended discussions about a potential exchange. It is also reported that they are pushing for large and timely distributions and voicing their displeasure with management to the Wisconsin Office of the Commissioner of Insurance. I do not blame the creditors for attempting to get the best deal possible for themselves. This is a classic equity vs. creditor situation. Creditors are pushing for things that are probably not in the best interest of equity holders at this time. But what is troubling here, is that the Board of the Company, which has a fiduciary responsibility to shareholders, may be under influence from creditors. Furthermore, certain members of the Board have been appointed to other boards by some of these creditors and have even served on the same boards as some of these creditors. The relationships seem to run deep and any outsider like myself can see a potential conflict of interest. Shareholders need to know that the Board has their best interests in mind – unequivocally.
I believe that the management team under the leadership of Nader Tavakoli has negotiated in good faith to get to a fair deal for both shareholders and creditors. Unfortunately, a consensual agreement has yet to be reached. Nader has been operating under the title of interim CEO for about one year. The Board has failed to hire Nader on a permanent basis or hire a new CEO despite a Search Committee set up at the end of December 2014. There has been market speculation that creditors have inserted themselves in the discussions surrounding the appointment of a CEO and have lobbied for and against various candidates. If true, this is completely unacceptable. This Board should not be and cannot be directed by creditors – that relationship is contractual. I remind the Board of its fiduciary duty to shareholders.
I support the appointment of Nader Tavakoli as permanent CEO of Ambac. Firstly, I think Nader is qualified for the job. Secondly, I think this company is in desperate need of continuity given all of the challenges the Company faces at this time. I believe the Company has a real opportunity to begin to realize the value of its assets, and changing leadership at this juncture is an ill-advised move on the part of the Board. Any move to do so should be explained to shareholders with complete transparency as to the decision-making process.
Finally, I believe the Company needs shareholder representation on the Board. I believe any meaningful shareholder (who is not also a creditor) is well suited to either serve on the Board or present potential candidates to this Board. This Board is unfortunately dominated by creditor appointees. Moreover, this Board owns very little stock other than what has been granted to them as compensation. While the equity price of Ambac is down over 40% year to date, the only Board member who has bought any meaningful amount of stock in the open market is Nader Tavakoli. The rest of the Board seems to be content with receiving annual stock grants.
In conclusion, I would again like to remind the Board of its fiduciary duty to shareholders. The Board, as any board, is expected to act in the best interests of shareholders. The Board should not be directed by or influenced by creditors regardless of past or current relationships. The Board needs to cast aside its personal interests and do what is right for shareholders. Finally, the Board needs to know they will be held accountable for their decisions and actions.
I urge the Board to do the right thing and hire Nader Tavakoli as permanent CEO. Lastly, I urge all shareholders to remain vigilant and to scrutinize any and all actions by this Board, especially as it relates to dealing with creditors.
SOURCE Nick Vouloumanos