Ambac Financial Group, Inc.
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(Exact name of Registrant as specified in its charter)
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Delaware
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1-10777
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13-3621676
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(State of incorporation)
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(Commission
file number)
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(I.R.S. employer
identification no.)
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One State Street Plaza, New York, New York 10004
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(Address of principal executive offices) (Zip Code)
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(212) 658-7470
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(Registrant's telephone number, including area code)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4c))
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•
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the Rehabilitation Exit Transactions have not been consummated within 365 days of the signing date of the Rehabilitation Exit Support Agreement (the “
Signing Date
”);
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•
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the Rehabilitator seeks an order or other relief from the Circuit Court for Dane County, Wisconsin or other court of competent jurisdiction (the “
Rehabilitation Court
”) inconsistent in any material respect with the term sheets affixed to the Rehabilitation Exit Support Agreement (the “
Term Sheets
”), or the Rehabilitation Court issues an order or grants relief inconsistent in any material respect with the Term Sheets; or
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•
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a material breach of any of the undertakings, representations, warranties or covenants set forth in the Rehabilitation Exit Support Agreement by any RESA Holder that is not, by its terms, curable or that is, by its terms, curable and is not cured by the 25th day after notice of such breach.
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•
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within 75 days of signing date of the Rehabilitation Exit Support Agreement, the Rehabilitator has not filed a motion in the Rehabilitation Court seeking entry of the approval order (the “
Filing Date
”);
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•
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the confirmation hearing has not commenced within 180 days of the Signing Date;
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•
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the Rehabilitation Exit Transactions have not been consummated within 270 days of the Signing Date;
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•
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the parties to the Rehabilitation Exit Support Agreement have not negotiated definitive documentation on or prior to the Filing Date;
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•
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the Rehabilitation Exit Transactions or the final definitive documents with respect to the Rehabilitation Plan Amendment, Exchange Offers or the Secured Notes do not conform in all material respects to the respective Term Sheet, except as approved by the Supermajority Consenting Holders; or
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•
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the Rehabilitator seeks an order or other relief from the Rehabilitation Court inconsistent in any material respect with the Term Sheets, or the Rehabilitation Court issues an order or grants relief inconsistent in any material respect with the Term Sheets; a material breach of any of the undertakings, representations, warranties, or covenants set forth in the Rehabilitation Exit Support Agreement by AAC and AFG that is not, by its terms, curable or that is, by its terms, curable and is not cured by the 25th day after notice of such breach.
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•
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requisite approval by the OCI;
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•
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the effectiveness of the Rehabilitation Plan Amendment concurrent with the closing of the Exchange Offers;
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•
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participation by 85% of the outstanding principal amount owned by holders of Surplus Notes (including the Company) in the Exchange Offers;
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•
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receipt of consents of at least a majority of the outstanding aggregate principal amount of the Surplus Notes (other than Surplus Notes beneficially owned by AFG or AAC or any of their affiliates) to the BSA Waiver and Amendment; and
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•
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subject to the approval of the OCI, a one-time current interest payment of approximately $12.5 million on the Surplus Notes outstanding immediately following the effective date of the Rehabilitation Plan Amendment (which can only be waived with the consent of the Supermajority Holders).
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•
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The Rehabilitation Plan Amendment will have been approved by the Rehabilitation Court, and such order will have become a final order;
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•
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As of the effective date, AAC will have sufficient capital and claims-paying resources to effect all of the Rehabilitation Exit Transactions and to exit rehabilitation;
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•
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The conditions to consummation of the Exchange Offers will have been satisfied or waived in full in accordance with the terms thereof;
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•
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AFG will have received from the Internal Revenue Service a ruling, in form and substance reasonably satisfactory to the Rehabilitator, AAC, and AFG; and
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•
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AAC will have received opinions from Sidley Austin LLP regarding the tax treatment of certain aspects of the Rehabilitation Exit Transactions, and certain transactions entered into to satisfy the condition regarding capital and
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•
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Upon receipt of any proceeds in excess of $1.6 billion minus certain amounts paid or payable to reinsurers from the RMBS Litigations by AAC (the “
Tier 2 Net Proceeds
”) and provided that the Initial Call Date (as defined below) has occurred.
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•
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In the event that a payment (other than payments in connection with closing of the Rehabilitation Exit Transactions) is made on the Surplus Notes (a “
SSN Payment Date
”) and provided that the Initial Call Date has occurred, AAC shall be obliged to prepay the Tier 2 Notes in an amount (the “
SSN Payment
”) equal to (a) the then outstanding accrued and unpaid interest and principal balance of the Tier 2 Notes, multiplied by (b) a specified percentage.
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•
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In the event of a SSN Payment Date prior to the scheduled maturity of the Surplus Notes that includes a principal payment on such Surplus Notes, occurring prior to the one year anniversary of a payment of principal on the Tier 2 Notes (a “
Recent Principal Payment
”) and provided that the Initial Call Date has occurred, in lieu of making a SSN Payment as calculated in the prior paragraph, AAC shall be obliged to make a SSN Payment equal to: (a) the
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•
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At the maturity date, or on any date on which the Tier 2 Notes are to be redeemed in whole, AAC will make a payment of the then outstanding interest and principal balance of the Tier 2 Notes, in full.
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•
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On any date on which the Tier 2 Notes are to be redeemed in part, AAC will make a payment of the interest and principal outstanding on the Tier 2 Notes to be redeemed and any applicable make-whole premium.
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•
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Satisfaction or waiver of the conditions to effectiveness set forth in the Plan Amendment;
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•
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Execution of final documentation;
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•
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Payment of reasonable and documented legal fees of the Investors subject to a cap; and
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•
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Delivery of customary corporate predicate, enforceability, and registration exemption opinions.
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Exhibit
Number |
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Description
|
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10.1
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Rehabilitation Exit Support Agreement, by and among Ambac Assurance Corporation, Ambac Financial Group, Inc. and certain holders of Ambac Assurance Corporation’s 5.1% Surplus Notes due 2020 and certain holders of Ambac Assurance Corporation’s deferred payment obligations, dated as of July 19, 2017.
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10.2
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Tier 2 Commitment Letter, dated as of July 19, 2017 from funds affiliated with or managed by investors party thereto.
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99.1
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Press Release dated July 19, 2017
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Ambac Financial Group, Inc.
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(Registrant)
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Dated:
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July 20, 2017
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By:
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/s/ William J. White
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First Vice President, Corporate Secretary and Assistant General Counsel
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Exhibit
Number |
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Description
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10.1
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Rehabilitation Exit Support Agreement, by and among Ambac Assurance Corporation, Ambac Financial Group, Inc. and certain holders of Ambac Assurance Corporation’s 5.1% Surplus Notes due 2020 and certain holders of Ambac Assurance Corporation’s deferred payment obligations, dated as of July 19, 2017.
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10.2
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Tier 2 Commitment Letter, dated as of July 19, 2017 from funds affiliated with or managed by investors party thereto.
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99.1
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|
Press Release dated July 19, 2017
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1
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For the avoidance of doubt, this provision is not intended to prohibit discussions that are unrelated to the RMBS Litigations nor is it intended to prevent a Holder from communicating to any person that it is unable to discuss or comment on the RMBS Litigations.
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AMUNDI ABSOLUTE RETURN CANYON FUND P.L.C.,
|
||
in respect of Amundi Absolute Return Canyon Reflection Fund
|
||
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By:
|
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Canyon Capital Advisors LLC,
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its Trading Manager
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
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Authorized Signatory
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CANYON-ASP FUND, L.P.
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||
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By:
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Canyon Capital Advisors LLC,
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its Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
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Authorized Signatory
|
CANYON BALANCED MASTER FUND, LTD.
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||
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By:
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Canyon Capital Advisors LLC,
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its Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
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Authorized Signatory
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THE CANYON VALUE REALIZATION MASTER FUND, L.P.
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||
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By:
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Canyon Capital Advisors LLC,
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its Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
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Authorized Signatory
|
CANYON BLUE CREDIT INVESTMENT FUND, L.P.
|
||
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By:
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Canyon Capital Advisors LLC,
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its Co-Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
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Authorized Signatory
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By:
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Canyon Partners Real Estate LLC,
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its Co-Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
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Authorized Signatory
|
CANYON GRF MASTER FUND II, L.P.
|
||
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By:
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Canyon Capital Advisors LLC,
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its Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
|
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Authorized Signatory
|
CANYON DISTRESSED OPPORTUNITY INVESTING FUND II, L.P.
|
||
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By:
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Canyon Capital Advisors LLC,
|
|
|
its Investment Advisor
|
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/s/ Jonathan M. Kaplan
|
By:
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Jonathan M. Kaplan
|
Title:
|
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Authorized Signatory
|
CANYON NZ-DOF INVESTING, L.P.
|
||
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By:
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Canyon Capital Advisors LLC,
|
|
|
its Investment Advisor
|
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/s/ Jonathan M. Kaplan
|
By:
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Jonathan M. Kaplan
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Title:
|
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Authorized Signatory
|
PERMAL CANYON IO LTD.
|
||
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By:
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Canyon Capital Advisors LLC,
|
|
|
its Investment Advisor
|
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|
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/s/ Jonathan M. Kaplan
|
By:
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Jonathan M. Kaplan
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Title:
|
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Authorized Signatory
|
P CANYON IE,
a sub-fund of Permal Managed Account Platform ICAV
|
||
|
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By:
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Canyon Capital Advisors LLC,
|
|
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its Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
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Authorized Signatory
|
CANYON VALUE REALIZATION MAC 18 LTD.
|
||
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By:
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Canyon Capital Advisors LLC,
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|
|
its Investment Advisor
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/s/ Jonathan M. Kaplan
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By:
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Jonathan M. Kaplan
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Title:
|
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Authorized Signatory
|
CANYON VALUE REALIZATION FUND, L.P.
|
||
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By:
|
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Canyon Capital Advisors LLC,
|
|
|
its Investment Advisor
|
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/s/ Jonathan M. Kaplan
|
By:
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Jonathan M. Kaplan
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Title:
|
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Authorized Signatory
|
WELLS FARGO ADVANTAGE ALTERNATIVE STRATEGIES FUND
|
||
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By:
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River Canyon Fund Management LLC,
|
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|
its Investment Sub-Advisor
|
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/s/ Jonathan M. Kaplan
|
By:
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Jonathan M. Kaplan
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Title:
|
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Authorized Signatory
|
CANYON DISTRESSED OPPORTUNITY MASTER FUND II, L.P.
|
||
|
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By:
|
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Canyon Capital Advisors LLC,
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|
|
its Investment Advisor
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/s/ Jonathan M. Kaplan
|
By:
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Jonathan M. Kaplan
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Title:
|
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Authorized Signatory
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CVI CVF III LUX SECURITIES S.A.R.L.
|
||
|
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/s/ Cecile Gadisseur
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By:
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Cecile Gadisseur
|
Its:
|
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Manager
|
CVI CVF II LUX SECURITIES TRADING S.A.R.L.
|
||
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/s/ Cecile Gadisseur
|
By:
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Cecile Gadisseur
|
Its:
|
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Manager
|
CVIC LUX SECURITIES TRADING S.A.R.L.
|
||
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/s/ Cecile Gadisseur
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By:
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Cecile Gadisseur
|
Its:
|
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Manager
|
CARVAL GCF LUX SECURITIES S.A.R.L.
|
||
|
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/s/ Cecile Gadisseur
|
By:
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Cecile Gadisseur
|
Its:
|
|
Manager
|
CVI CHVF LUX SECURITIES S.A.R.L.
|
||
|
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/s/ Cecile Gadisseur
|
By:
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Cecile Gadisseur
|
Its:
|
|
Manager
|
CVIC II LUX SECURITIES TRADING S.A.R.L.
|
||
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/s/ Cecile Gadisseur
|
By:
|
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Cecile Gadisseur
|
Its:
|
|
Manager
|
CVI AA LUX SECURITIES S.A.R.L.
|
||
|
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/s/ Cecile Gadisseur
|
By:
|
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Cecile Gadisseur
|
Its:
|
|
Manager
|
CVF LUX SECURITIES TRADING S.A.R.L.
|
||
|
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/s/ Cecile Gadisseur
|
By:
|
|
Cecile Gadisseur
|
Its:
|
|
Manager
|
CVI IOF MASTER FUND LP
|
||
|
|
|
By:
|
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CarVal IOF GP LP,
its general partner
|
By:
|
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CarVal Carry GP Corp.,
its general partner
|
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|
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/s/ James Ganley
|
By:
|
|
James Ganley
|
Its:
|
|
Director
|
CENTERBRIDGE CREDIT PARTNERS, L.P.
|
||
|
|
|
By:
|
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Centerbridge Credit Partners General Partner, L.P.,
|
|
|
its general partner
|
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/s/ Richard Grissinger
|
By:
|
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Richard Grissinger
|
Title:
|
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Authorized Signatory
|
CENTERBRIDGE CREDIT PARTNERS MASTER, L.P.
|
||
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|
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By:
|
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Centerbridge Credit Partners Offshore General Partner, L.P., its general partner
|
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/s/ Richard Grissinger
|
By:
|
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Richard Grissinger
|
Title:
|
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Authorized Signatory
|
CENTERBRIDGE SPECIAL CREDIT PARTNERS, L.P.
|
||
|
|
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By:
|
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Centerbridge Special Credit Partners
|
|
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General Partner, L.P., its general partner
|
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/s/ Richard Grissinger
|
By:
|
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Richard Grissinger
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Title:
|
|
Authorized Signatory
|
CENTERBRIDGE SPECIAL CREDIT PARTNERS II, L.P.
|
||
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|
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By:
|
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Centerbridge Special Credit Partners
|
|
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General Partner II, L.P., its general partner
|
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|
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/s/ Richard Grissinger
|
By:
|
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Richard Grissinger
|
Title:
|
|
Authorized Signatory
|
M.H. DAVIDSON & CO.
|
||
|
|
|
By:
|
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M.H. Davidson & Co. GP, L.L.C.,
|
|
|
its general partner
|
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|
|
/s/ Patrick Dennis
|
By:
|
|
Patrick Dennis
|
Title:
|
|
Managing Member
|
DAVIDSON KEMPNER INSTITUTIONAL PARTNERS, L.P.
|
||
|
|
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By:
|
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Davidson Kempner Advisers, Inc.,
|
|
|
its general partner
|
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/s/ Patrick Dennis
|
By:
|
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Patrick Dennis
|
Title:
|
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Principal
|
DAVIDSON KEMPNER PARTNERS
|
||
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By:
|
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MHD Management Co., its general partner
|
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MHD Management Co. GP, L.L.C., its general partner
|
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/s/ Patrick Dennis
|
By:
|
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Patrick Dennis
|
Title:
|
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Managing Member
|
DAVIDSON KEMPNER INTERNATIONAL, LTD.
|
||
|
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By:
|
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Davidson Kempner Capital Management LP,
|
|
|
its investment manager
|
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/s/ Patrick Dennis
|
By:
|
|
Patrick Dennis
|
Title:
|
|
Managing Member
|
DAVIDSON KEMPNER DISTRESSED OPPORTUNITIES FUND LP
|
||
|
|
|
By:
|
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DK Group LLC,
|
|
|
its general partner
|
|
|
|
|
|
/s/ Patrick Dennis
|
By:
|
|
Patrick Dennis
|
Title:
|
|
Managing Member
|
DAVIDSON KEMPNER DISTRESSED OPPORTUNITIES INTERNATIONAL LTD.
|
||
|
|
|
By:
|
|
DK Management Partners LP,
|
|
|
its investment manager
|
|
|
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|
|
/s/ Patrick Dennis
|
By:
|
|
Patrick Dennis
|
Title:
|
|
Limited Partner
|
DAVIDSON KEMPNER LONG-TERM DISTRESSED OPPORTUNITIES FUND LP
|
||
|
|
|
By:
|
|
Davidson Kempner Long-Term Distressed Opportunities GP LLC, its general partner
|
|
|
|
|
|
/s/ Patrick Dennis
|
By:
|
|
Patrick Dennis
|
Title:
|
|
Managing Member
|
DAVIDSON KEMPNER LONG-TERM DISTRESSED OPPORTUNITIES INTERNATIONAL MASTER FUND LP
|
||
|
|
|
By:
|
|
Davidson Kempner Long-Term Distressed Opportunities GP LLC, its general partner
|
|
|
|
|
|
/s/ Patrick Dennis
|
By:
|
|
Patrick Dennis
|
Title:
|
|
Managing Member
|
EJF CAPITAL LLC,
|
||
|
|
|
as Manager and Sole Member of certain affiliated entities holding Senior Surplus Notes and Deferred Amounts
|
||
|
|
|
|
|
/s/ Neal Wilson
|
By:
|
|
Neal Wilson
|
Title:
|
|
Chief Operating Officer
|
Introduction
|
|
General:
|
The Plan Amendment is intended to allow for:
• amendment of the existing Plan to provide for the satisfaction and discharge in full of all Deferred Amounts with the consideration specified below;
• conclusion of the Segregated Account’s rehabilitation;
• termination of the Rehabilitation Proceeding;
• merger of the Segregated Account back into AAC (“
Merger
”); and
• payment of all future claims in full in cash on a going-forward basis.
|
Key Dates
|
|
Effective Date:
|
The date on which the Closing Conditions (as defined below) have been satisfied or waived by the Rehabilitator in his sole discretion.
|
Record Date:
|
The date the Court enters the order (the “
Confirmation Order
”) approving the Plan Amendment.
|
1
|
Capitalized terms used but not otherwise herein defined have the meanings ascribed to them in the Plan and the Rehabilitation Exit Support Agreement, each as the case may be.
|
Deferred Amount Treatment
|
|
Initial Exchange:
2
|
The Plan Amendment will provide that, on the Effective Date, an aggregate of $298 million in Deferred Amounts (including Accretion Amounts)
3
outstanding as of the Record Date be transferred pro rata from all holders of Deferred Amounts (other than AAC and Ambac Financial Group, Inc. (“
AFG
,” collectively with AAC and the Segregated Account, the “
Ambac Parties
”)) (i) to AFG in exchange for AFG’s transfer of $132 million (principal plus accrued interest)
4
of GA SSNs (as defined below) to such holders and (ii) to the third-party holders of GA SSNs who are signatories to the Rehabilitation Exit Support Agreement (the “
Sponsoring GA SSN Holders
”) in exchange for the Sponsoring GA SSN Holders’ transfer of $166 million (principal plus accrued interest)
5
of GA SSNs (as defined below) to such holders (collectively, the “
Initial Exchange
”). The Initial Exchange will be effectuated pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “
Securities Act
”).
6
|
Pre-Record Date Deferred Amounts:
7
|
Immediately after the Initial Exchange, pursuant to Section 2.02 of the Plan and Section 2.04 of the Payment Guidelines, each Deferred Amount established by the Rehabilitator based on Permitted Policy Claims arising from a right to payment occurring prior to the Record Date (collectively, “
Pre-Record Date Deferred Amounts
”) shall receive the following consideration:
• 45.7% in legal tender of the United States of America (“
Cash
”); and
• 46.9% in Senior Secured Notes pursuant to an offering made under Section 3(a)(10) of the Securities Act (together with the Cash and the Senior Secured Notes, the “
Deferred Amount Consideration
”).
Notwithstanding the foregoing, any Pre-Record Date Deferred Amounts held by AFG (including Deferred Amounts received by AFG in the Initial Exchange) shall receive Senior Secured Notes in lieu of the Cash to which it would otherwise be entitled, such that AFG’s Deferred Amount Consideration shall consist exclusively of 91.3% in Senior Secured Notes. To the extent provided by the Existing Plan, accretion shall be payable on such Pre-Record Date Deferred Amounts for the period from the Record Date until the Effective Date.
The remaining 7.4% of all Pre-Record Date Deferred Amounts not held by AFG and 8.7% of Pre-Record Date Deferred Amounts held by AFG shall be discharged without further consideration (the “
Discharged Deferred Amount
”). The Discharged Deferred Amount will serve to discharge any related Accretion Amounts. If the related Accretion Amount is less than 7.4% of any Pre-Record Date Deferred Amount, then the remainder of the Discharged Deferred Amount shall serve to discharge a portion of the applicable outstanding Deferred Amount.
Should the Ambac Parties settle any of the RMBS Litigation (as defined in the Senior Secured Notes Term Sheet) before the Effective Date, any proceeds received by the Ambac Parties from such settlement shall replace Senior Secured Notes having a face amount equal to the amount of such proceeds that would otherwise be issued as Senior Secured Notes Consideration, in each case to the extent such proceeds would have been payable to holders of Senior Secured Notes had such settlement proceeds been instead received immediately after issuance of the Senior Secured Notes.
|
2
|
All amounts referenced in this Term Sheet are current estimates assuming a transaction closing date of June 30, 2018 and are subject to change pending a final reconciliation of Policy Claims and Deferred Amounts.
|
3
|
Equal to 12.5% of all Deferred Amounts (including outstanding Accretion Amounts) not held by AFG or AAC (the “
Third Party Deferred Amounts
”).
|
4
|
Equal to all (i) GA SSNs and SA SSNs held by AFG as of the Record Date less (ii) $100 million, less (iii) accrued and unpaid interest on $100 million of SSNs between June 30, 2017 and the Record Date.
|
5
|
Equal to 12.5% of all Third Party Deferred Amounts less the amount specified in footnote 5.
|
6
|
The various steps and transactions that constitute the Initial Exchange are detailed in the transaction mechanics presentation annexed hereto as
Exhibit B
(the “
Transaction Mechanics
”).
|
7
|
Any percentages referenced herein are subject to (i) final determination of the outstanding amounts of Third Party Deferred Amounts and (ii) the total issuance of Senior Secured Notes.
|
Post-Record Date Permitted Policy Claims:
|
All Permitted Policy Claims arising from a right to payment occurring on or after the Record Date (collectively, “
Post-Record Date Permitted Policy Claims
”) shall, subject to the Effective Date, receive payment in Cash in full in accordance with the terms of the relevant Policy.
Post-Record Date Permitted Policy Claims shall be paid in full in Cash; provided, however, that if the Rehabilitation Exit Support Agreement is terminated prior to the occurrence of the Effective Date, the Rehabilitator shall reset the IPP for such Claims to 45% and establish Deferred Amounts for the balance of such Claims to be paid in accordance with the Plan.
|
Netting of Recoveries
|
Deferred Amount Consideration issuable with respect to any Deferred Amount, and Cash payable with respect to any Post-Record Date Deferred Amount, shall be reduced by the amount of any settlements, payments, distributions, or other recoveries received by the holder(s) of such Deferred Amount since the establishment of such Deferred Amount.
|
Source of Consideration:
|
The Cash will be paid by the Segregated Account, which will obtain such Cash from AAC pursuant to the Segregated Account’s rights under the Reinsurance Agreement. The Senior Secured Notes will be issued by a special purpose entity established by AAC to holders of Deferred Amounts on behalf of the Segregated Account, in satisfaction of AAC’s obligations to the Segregated Account under the Reinsurance Agreement, and will be based on the terms and conditions set forth in the term sheet attached as an exhibit to the Rehabilitation Exit Support Agreement (the “
Senior Secured Notes Term Sheet
”).
|
Classification and Treatment of Claims
|
|
Administrative Claims:
|
All Permitted Administrative Claims shall be satisfied or otherwise paid in the ordinary course as they come due.
|
Deferred Amounts:
|
As described under “Deferred Amount Treatment” above.
|
Senior Surplus Notes of the Segregated Account (“SA SSNs”)
|
Effective immediately prior to the Effective Date, Section 2.05 of the Plan shall be deleted from the Plan and be of no further force or effect.
• Holders of SA SSNs will not be entitled to any payment or other consideration arising out of, as a result of, or related to, the Plan Amendment, including any portion of the Deferred Amount Consideration.
• The Plan Amendment will not limit any rights of holders of SA SSNs to receive amounts to which they would be entitled by operation of Section 2.05 of the Plan to the extent arising from distributions made under the Plan prior to the Effective Date.
SA SSNs will continue to remain outstanding after the Effective Date as Remaining Senior Surplus Notes, with AAC, as the obligor thereunder as a result of the Merger.
|
Junior Surplus Notes of the Segregated Account (“SA JSNs”):
|
Holders of SA JSNs will not be entitled to any payment or other consideration arising out of, as a result of or related to the Plan Amendment, including any portion of the Deferred Amount Consideration. SA JSNs will continue to remain outstanding after the Effective Date, with AAC as the obligor thereunder as a result of the Merger.
|
Implementation
|
|
Distribution Procedures:
|
From and after the Effective Date, Trustees receiving Deferred Amount Consideration will, on the next occurring Bond Distribution Date, distribute such Deferred Amount Consideration to the holders of securities insured by the policies to which such Deferred Amount Consideration relates.
|
Requested Court Findings
|
The Rehabilitator intends to request that the Court make the findings of fact and conclusions of law set forth on
Exhibit A
in connection with the Court’s approval of the Plan Amendment.
|
Termination of Intracompany Agreements:
|
On the Effective Date, without further action by the Court, the Reinsurance Agreement, the Secured Note, the Cooperation Agreement, and the Management Agreement will terminate and no longer be of any force or effect, all of AAC’s obligations thereunder will be deemed to have been satisfied in full and AAC will have no further obligation thereunder.
|
Termination of
Rehabilitation Proceeding: |
The Rehabilitation Proceeding will terminate on the Effective Date without further action of the Court. AAC will resume possession of its property and the conduct of its business upon termination of the Rehabilitation Proceeding.
|
Termination of Duties of Rehabilitator:
|
On the Effective Date, the Rehabilitator will be discharged of all duties as Rehabilitator and the Rehabilitator’s employees and appointed agents will be discharged of their duties, if any, with respect to the rehabilitation of the Segregated Account. The Rehabilitator and his employees and appointed agents will have no liability for actions taken by AAC from and after the Effective Date.
|
Notice Mechanics
|
The Rehabilitator will give notice of the Plan Amendment and Amended Disclosure Statement by:
• Posting them to the Website on the date that the Rehabilitator files a motion to amend the Plan;
• Distributing them to policyholders by first-class mail; and
• By publication in (a)
USA Today
, National Edition, (b) the
Milwaukee Journal Sentinel
, and (c) and any other newspaper designated by the Rehabilitator in his sole discretion.
On the Effective Date, or as soon as reasonably practicable thereafter, the Rehabilitator will post a notice to the Website advising of the Effective Date of the confirmed Plan Amendment (the “
Amended Plan
”).
|
Conditions to Plan Effectiveness
|
Conditions to Effectiveness of Plan Amendment :
|
Unless otherwise specified herein, the Effective Date shall be conditioned upon each of the following conditions having been satisfied or waived by the Rehabilitator in his sole discretion (collectively, the “
Closing Conditions
”):
• The Plan Amendment will have been approved by the Court, including an approval as to the procedural and substantive fairness of the terms and conditions of the issuance of the Senior Secured Notes and the exchange of Deferred Amounts for GA SSNs pursuant to the Initial Exchange, in form and substance satisfactory to the Rehabilitator and consistent with the requirements of Section 3(a)(10) under the Securities Act and any “Blue Sky” laws required for the issuance of the Senior Secured Notes and the exchange of Deferred Amounts for GA SSNs pursuant to the Initial Exchange,
and such order will have become a Final Order;
• As of the Effective Date, AAC will have sufficient capital and claims-paying resources to effect all of the transactions contemplated hereto and to exit rehabilitation;
• The conditions (other than effectiveness of the Amended Plan) to consummation of the Exchange Offers (as such term is defined in the Exchange Offer Term Sheet annexed to the Rehabilitation Exit Support Agreement) will have been satisfied or waived in full in accordance with the terms thereof;
• AFG will have received from the Internal Revenue Service a ruling, in form and substance reasonably satisfactory to the Rehabilitator, AAC, and AFG, that neither (i) the satisfaction of the Deferred Amounts pursuant to the Plan Amendment nor (ii) any exchange by AAC for Senior Surplus Notes contemplated by the Definitive Documents will be a “designated event” for purposes of Internal Revenue Service Notice 2004-37; and
• AAC will have received opinions from Sidley Austin LLP regarding the tax treatment of those aspects of the Transaction Mechanics, Plan Amendment, Exchange Offers, Waiver and Amendment, and certain transactions entered into to satisfy the condition regarding capital and claims-paying resources described above, that are relevant to the continued affiliation of AAC with AFG for federal income tax purposes, to the continued availability of AAC’s net operating losses, and to REMIC matters, with such opinions in form and substance satisfactory to the Rehabilitator and reasonably satisfactory to AAC; provided that this Closing Condition may only be waived by AAC in its sole discretion.
|
General Provisions
|
No Defaults:
|
On the Effective Date, any default, event of default, or other event or circumstance relating to AAC, the Segregated Account, or any subsidiary thereof, then existing or alleged to exist (or that would exist with the passing of time or the giving of notice or both), under any agreement will be deemed to be cured and not to have occurred or existed, now, in the past or in the future, to the extent such default, event of default, or other event or circumstance is, or is alleged to be, due or relating to, or arising under or as a result of, the terms, existence, execution, delivery, performance in accordance with the terms thereof or the creation or consummation (in each case as applicable) of: (i) any Plan Amendments; (ii) the Plan or any previous versions of the Plan; (iii) the Segregated Account; (iv) the Merger; (v) the Exchange Offers; (vi) the Definitive Documents; (vii) the Rehabilitation Proceeding and all orders of the Rehabilitation Court entered therein; (viii) the grounds for the Rehabilitation Proceeding; (ix) the failure of AAC or the Segregated Account to pay any amount prior to the Effective Date under any Policy or Transaction Document; (x) the financial condition of AAC prior to the Effective Date resulting from the Rehabilitation Proceeding or the grounds for the Rehabilitation Proceeding; or (xi) noncompliance by AAC or the Segregated Account with any provision of any Policy or Transaction Document prior to the Effective Date (collectively, the “
Rehabilitation Circumstances
”).
The foregoing shall apply to, among other things, determination of control rights, waterfall priority, subrogation and entitlement to distributions and reimbursements under documents governing transactions as to which the Segregated Account or AAC had issued a financial guaranty policy.
|
Releases:
|
As of the Effective Date, all holders and beneficial holders of Deferred Amounts shall release unconditionally and forever each of (i) the Ambac Parties, (ii) the Rehabilitator, (iii) the attorneys, agents, advisors, representatives, officers, directors, and employees of each of the Ambac Parties and the Rehabilitator, and any advisors retained by the Representatives (as defined below) of the foregoing (collectively, the “
Representatives
”), from any and all Causes of Action based in whole or in part on any act, omission, transaction, event or other occurrence taking place on or prior to the date of the Order of Rehabilitation and arising from or relating to the operation of the Rehabilitation Proceeding (including the Rehabilitation Circumstances, the commencement of the Rehabilitation Proceeding, the preparations therefor, negotiations relating thereto, any restructuring work relating thereto and preparation of the Amended Plan); provided that the foregoing shall not affect the liability of any such Person that otherwise would result from any act or omission that is determined by a Final Order to constitute willful misconduct, gross negligence, intentional fraud, criminal conduct, intentional unauthorized misuse of confidential information that causes damages or
ultra vires
acts.
|
Discharge:
|
On the Effective Date, all obligations of the Segregated Account to the extent arising on or prior to the Effective Date will be deemed discharged in full, including without limitation with respect to Policy Claims arising prior to the Record Date.
The foregoing will not limit:
• rights of Segregated Account policyholders as to which a Deferred Amount is outstanding as of the Record Date to receive the Deferred Amount Consideration in accordance with the terms of the Amended Plan;
• rights of holders of Post-Record Date Claims to receive payment in full in cash of valid Policy Claims arising on and after the Record Date; and
• rights provided to holders of SA SSNs and SA JSNs under the express terms of such instruments (it being understood that the obligor under such instruments will be AAC, after giving effect to the Merger).
|
Exculpation:
|
As of the Effective Date, each of (i) the Ambac Parties, (ii) the Rehabilitator, (iii) the Sponsoring GA SSN Holders, (iv) the Representatives and employees of each of the Ambac Parties, the Rehabilitator, the Sponsoring GA SSN Holders, and any advisors retained by the Representatives of the foregoing, and (v) the directors, officers, and employees of the Ambac Parties, the Sponsoring GA SSN Holders, and any advisors retained by the Representatives of the foregoing (collectively, the “
Exculpated Parties
”), are exculpated from any and all Causes of Action based in whole or in part on any act, omission, transaction, event or other occurrence arising out of, in connection with or otherwise relating to the Rehabilitation Proceeding (including the commencement of the Rehabilitation Proceeding, the preparation therefor, negotiations relating thereto, any restructuring work relating thereto, any Court orders sought or obtained, and the administration of the Rehabilitation Proceeding), the Disclosure Statement (including the Disclosure Statement’s formulation, negotiation, preparation and dissemination), the Plan and the Plan Amendment (including the Plan and Plan Amendment’s formulation, negotiation, preparation, dissemination and approval) or any contract, instrument, document or other agreement entered into as part of or pursuant to the Amended Plan (collectively, the “
Exculpated Causes of Action
”); provided that the foregoing shall not affect the liability of any such Person that (i) arises out of any uncured breach of the Rehabilitation Exit Support Agreement or (ii) otherwise would result from any act or omission that is determined by a Final Order to constitute willful misconduct, gross negligence, intentional fraud, criminal conduct, intentional unauthorized misuse of confidential information that causes damages or ultra vires acts.
|
Injunction:
|
Except as provided in the Definitive Documents (
e.g.
, Post-Effective Date Resolution of Disputes Regarding Policy Claims), as of the Effective Date, all persons and entities will be precluded from asserting against the Ambac Parties, or their respective successors or property or any of their respective current or former members, shareholders, affiliates, officers, directors, employees or agents, any Deferred Amounts, obligations, rights, causes of action or liabilities, based upon any act, omission, transaction, or other activity of any kind or nature to the extent arising out of the Rehabilitation Circumstances. Without limiting the foregoing, the following actions with respect to a Deferred Amount will be enjoined:
• commencing or continuing in any manner any action or other proceeding on account of such Deferred Amount, or the property to be distributed under the terms of the Amended Plan, other than to enforce any right to the Deferred Amount Consideration;
• enforcing, attaching, collecting, or recovering in any manner any judgment, award, decree, or order against the Ambac Parties;
• creating, perfecting, or enforcing any Lien or other encumbrance against property of the Ambac Parties, or any property to be distributed under the terms of the Amended Plan;
• asserting any right of setoff, subrogation, or recoupment of any kind, directly or indirectly, against any obligation due to the Ambac Parties, or any direct or indirect transferee of any property of, or successor in interest to, the Ambac Parties as prohibited by Wis. Stat. § 645.56; and
• acting or proceeding in any manner, in any place whatsoever, that does not comply with the provisions of the Amended Plan.
|
Preservation of Causes of Action:
|
Except to the extent expressly released under the Amended Plan, AAC will retain all rights to commence and pursue any and all claims and causes of action, including those of the Segregated Account.
|
Definitive Documents and Due Diligence:
|
This Term Sheet is indicative, and non-binding, and any final agreement will be subject to the Definitive Documents. The Definitive Documents will contain terms, conditions, representations, warranties, and covenants, each customary for the transactions described herein consistent with the terms of this Term Sheet.
|
Retention of Jurisdiction:
|
The Rehabilitation Court will retain exclusive jurisdiction to hear and determine all matters arising out of, or related to, the implementation, interpretation and/or enforcement of the Confirmation Order, the Rehabilitation Proceeding, and the Amended Plan.
|
Pre-Effective Date resolution of Disputes regarding Deferred Amounts:
|
The Effective Date shall have no effect on, and shall not otherwise provide additional rights to holders of Deferred Amounts, prior to the Effective Date, where any Claims relating to such Deferred Amounts have been Permitted, Disallowed, satisfied, terminated, commuted, or extinguished pursuant to the Plan.
|
Post-Effective Date Resolution of Disputes regarding Policy Claims:
|
From and after the Effective Date, AAC will be empowered to dispute, settle and otherwise resolve any disputes regarding Policy Claims that are based on events, occurrences, and circumstances occurring before the Effective Date, and are otherwise not Permitted before the Effective Date (including as to their calculation, allowance, allocation and payment) pursuant to dispute resolution procedures to be included in the Amended Plan, which shall be substantially consistent with the dispute resolution procedures included in the Plan and which shall be reasonably acceptable to AAC, the Rehabilitator, and the Sponsoring GA SSN Holders (the “
Dispute Resolution Procedures
”). Disputes resolved in accordance with the Dispute Resolution Procedures shall be binding on holders of such Policy Claims.
|
Payment of ACP Obligations:
|
Distribution of Deferred Amount Consideration on account of Policy Claims related to the obligation of Ambac Credit Products, LLC (“
ACP
”) under certain related credit default swaps, shall be deemed payment by ACP of its obligations under such credit default swap.
|
Plan Applicable until Effective Date:
|
With respect to periods preceding the Effective Date, the Plan and all orders from the Court will remain in full force and effect in all respects, including with respect to:
• allowance, determination, payment and dispute of Claims and Deferred Amounts;
• disallowance of Claims not filed in accordance with the timing and other requirements of the Plan;
• the validity of any action, determination or other matter effected prior to the Effective Date pursuant to the Plan; and
• utilization of Alternative Resolutions to resolve Claims and Deferred Amounts.
With effect from and after the Effective Date, the Amended Plan shall supersede the Plan and, to the extent inconsistent with the Amended Plan, all orders from the Rehabilitation Court, in all respects.
|
◦
|
The evidence provided by the Rehabilitator establishes just and sufficient cause to grant the relief requested;
|
◦
|
The relief requested by the Rehabilitator is in the best interests of, and fair and equitable to, the Segregated Account’s policyholders, creditors and other claimants;
|
◦
|
Subject to satisfaction or waiver by the Rehabilitator of the conditions to effectiveness of the Plan Amendment, the rehabilitation has been accomplished and the grounds for rehabilitation no longer exist;
|
◦
|
The Rehabilitator’s disclosures regarding the Plan Amendment were sufficient for the Court and the public to assess the fairness and rational basis of the Plan Amendment and its specific provisions;
|
◦
|
Policyholders and all other parties-in-interest were afforded fair and reasonable notice and opportunity to be heard concerning approval of the Plan Amendment and its provisions;
|
◦
|
The Rehabilitator provided sufficient information to the Court in connection with the approval of the Plan Amendment to determine the value of the claims or interests to be treated pursuant to the Plan Amendment;
|
◦
|
The Plan Amendment is consistent with the priority structure of Wis. Stat §645.68 in furtherance of the equitable apportionment of unavoidable losses;
|
◦
|
The Plan Amendment is both feasible and fair and equitable to policyholders and others with an interest in the Segregated Account;
|
◦
|
The Rehabilitator lawfully exercised his discretion under Wisconsin law and the prior orders of the Court in preparing and submitting the Plan Amendment for approval by the Court;
|
◦
|
The Court has continuing exclusive jurisdiction to oversee the Rehabilitation Proceeding and its termination, including exclusive jurisdiction to conduct the hearings on approval of the Plan Amendment and to exercise continuing authority over matters arising following entry of a Final Order approving the Plan Amendment;
|
◦
|
Any securities issued or distributed during, and in furtherance of, the Rehabilitation Proceeding, or otherwise issued pursuant to the Plan, the Plan Amendment, are both procedurally and substantively fair, within prevailing standards of commercial fairness, to any recipients of such securities, it being understood that such issuance and distribution is being effected pursuant to an exemption from registration under Section 3(a)(10) of the Securities Exchange Act of 1933, as amended, in reliance upon this determination.
|
Initial Deposit
10
|
On or prior to the fifteenth (15th) Business Days preceding the scheduled expiration of the Offers (as defined below), (i) each Holder (including any Joining Party) shall deposit into an escrow account specified by the Rehabilitator, which account shall be for the benefit of the depositing Holders (the “
Escrow Account
”), its pro rata share of Notes (as defined below) with an aggregate principal amount outstanding, which when taken together with accrued and unpaid interest thereon (together, “
Total Value
”), equal $166
11
million (the “
Sponsoring Holder Notes
”) and (ii) Ambac Financial Group, Inc. (“
AFG
”) shall deposit Notes with a Total Value equal to $132
12
million into the Escrow Account.
13
In the event that one or more Parties fails to deposit its pro rata share of Sponsoring Holder Notes into the Escrow Account as required hereby (a “
Sponsoring Holder Default
”), the Ambac Parties may adjust the Offers such that any shortfall may be contributed by one or more other holders of Notes or make any other appropriate adjustment to preserve the economic terms of the Offers and any such adjustment shall not constitute a breach of this Agreement or a Group Termination Event, provided that non-defaulting Holders shall not be required to purchase any Notes for such contribution. The Sponsoring Holder Notes shall be held in the Escrow Account for the benefit of the depositing Holder of the Sponsoring Holder Notes. If the Offers do not close or the Rehabilitation Exit Support Agreement terminates in accordance with its terms, any Notes held in the Escrow Account will be returned to the depositing Holder pursuant to an escrow agreement to be agreed upon by the Parties.
|
9
|
All figures in this term sheet assume a closing on, and are based on estimated amounts expected to be outstanding as of, June 30, 2018 (but without reflecting the transfers into the Escrow Account as described in Initial Deposit) and are subject to change, including the amount of Deferred Amounts. Amounts assume 100% participation of holders of Notes in the Offers. Capitalized terms used herein without definition have the meanings ascribed to them in the Rehabilitation Exit Support Agreement to which this term sheet is attached.
|
10
|
See Step 0 of the Illustrative Transaction Mechanics presentation.
|
11
|
Equal to (i)12.5% of the Third Party DPO Amount less (ii) the AFG Escrow SSN Amount (as calculated, the “
Sponsoring Holder Escrow SSN Amount
”).
|
12
|
Equal to (i) the AFG SSN Amount less (ii) $100 million less (iii) accrued and unpaid interest on $100 million of SSNs between 6/30/2017 and the Record Date (as calculated, the “
AFG Escrow SSN Amount
”).
|
13
|
To include all Notes required to effect Step 1 of the Illustrative Transaction Mechanics presentation.
|
The DPO Offer
14
|
Subject to the satisfaction of the conditions precedent set out below, AAC will, concurrently with the effectiveness of the Rehabilitation Plan Amendment but subject to the Transaction Sequencing specified below, offer (the “
DPO Offer
”) the DPO Offer Consideration to the Holders, and only to the Holders, in exchange for each $1.00 of principal amount and accrued and unpaid interest thereon (up to, but not including, the Settlement Date) of Notes other than Sponsoring Holder Notes validly tendered and not withdrawn at or prior to the Expiration Time as set forth below:
DPO Offer Consideration
: $1.00 of Deferred Amounts (which for the avoidance of doubt, includes any accretion amounts), evidenced by a Claim Bond.
DPO Exchange Cap
: Notes other than Sponsoring Holder Notes with a Total Value equal to $202
15
million, tendered and accepted in the DPO Offer.
Proration
: Notes other than Sponsoring Holder Notes accepted for purchase in the DPO Offer may be subject to proration (rounded down to avoid the purchase of Sponsoring Holder Notes in a principal amount other than in integral multiples of $1.00), so that AAC will only accept for purchase Sponsoring Holder Notes in an aggregate principal amount up to the DPO Exchange Cap described above.
|
14
|
See Step 2 of the Illustrative Transaction Mechanics presentation.
|
15
|
Equal to 12.5% of the AAC Held DPO Amount.
|
The AAC Sponsoring Holder Offer
16
|
Subject to the satisfaction of the conditions precedent set out below, AAC will, concurrently with the effectiveness of the Rehabilitation Plan Amendment but subject to the Transaction Sequencing specified below, offer (the “
AAC Sponsoring Holder Offer
”) to the Holders, and only to the Holders, the AAC Sponsoring Holder Exchange Consideration in exchange for each $1.00 of principal amount and accrued and unpaid interest thereon (up to, but not including, the Settlement Date) of the Notes validly tendered and not withdrawn at or prior to the Expiration Time as set forth below:
AAC Sponsoring Holder Exchange Consideration
: (i) $0.46 in cash and (ii) $0.47 in principal amount of Secured Notes (the “
AAC Sponsoring Holder Exchange Consideration
”).
17
For the avoidance of doubt, $0.065 of each dollar of principal amount and accrued and unpaid interest thereon of each Note tendered and accepted in the AAC Sponsoring Holder Offer will be surrendered as discount by the holder of such Note. Interest on the Notes will continue to accrue to, but not including, the Settlement Date.
Should AAC settle any of the RMBS Litigation before the Effective Date, any proceeds received by AAC from such settlement shall replace Secured Notes having a face amount equal to the amount of such proceeds that would otherwise be issued as AAC Sponsoring Holder Exchange Consideration, in each case to the extent such proceeds would have been payable to holders of Secured Notes had such settlement proceeds been instead received immediately after issuance of the Secured Notes.
Exchange Cap
: A percentage to be determined of the Total Value of Notes owned by each Holder tendered and accepted in the AAC Sponsoring Holder Offer.
18
Proration
: None.
Adjustment in the Event of a Sponsoring Holder Default
: In the event of a Sponsoring Holder Default, the Ambac Parties shall adjust the Offers such that any shortfall may be contributed by one or more other holders of Notes or make any other appropriate adjustment to preserve the economic terms of the Offers and any such adjustment shall not constitute a breach of this Agreement or a Group Termination Event, provided that non-defaulting Holders shall not be required to purchase any Notes for such contribution. The Sponsoring Holder Notes shall be held in the Escrow Account for the benefit of the depositing Holder of the Sponsoring Holder Notes.
|
16
|
See Step 3B of the Illustrative Transaction Mechanics presentation.
|
17
|
For the avoidance of doubt, $0.065 of each dollar of principal amount and accrued and unpaid interest thereon of each Note tendered and accepted in the AAC Sponsoring Holder Offer will be surrendered as discount by the holder of such Note. Interest on the Notes will continue to accrue to, but not including, the Settlement Date.
|
18
|
To be determined based on participants in AAC Sponsoring Holder Offer consistent with the following formula: 1 - (12.5% * Sponsoring Holder SSN Amount) / (Sponsoring Holder SSN Amount less the Sponsoring Holder Escrow SSN Amount less 12.5% of the AAC Held DPO Amount).
|
The AAC Offer
19
|
Subject to the satisfaction of the conditions precedent set out below, AAC will, concurrently with the effectiveness of the Rehabilitation Plan Amendment but subject to the Transaction Sequencing specified below, offer to the holders of the Notes (other than the Holders, AAC and AFG) (the “
AAC Offer
” and, together with the DPO Offer, and the AAC Sponsoring Holder Offer, the “
Offers
”) the AAC Exchange Consideration in exchange for each $1.00 of principal amount and accrued and unpaid interest thereon (up to, but not including, the Settlement Date) of the Notes validly tendered and not withdrawn at or prior to the Expiration Time as set forth below:
AAC Exchange Consideration
: (i) $0.46 in cash and (ii) $0.47 in principal amount of Secured Notes (the “
AAC Exchange Consideration
”).
20
Should AAC settle any of the RMBS Litigation before the Effective Date, any proceeds received by AAC from such settlement shall replace Secured Notes having a face amount equal to the amount of such proceeds that would otherwise be issued as AAC Exchange Consideration, in each case to the extent such proceeds would have been payable to holders of Secured Notes had such settlement proceeds been instead received immediately after issuance of the Secured Notes.
Exchange Cap
: Approximately 87.5% of the Total Value of Notes owned by each holder (excluding the Sponsoring Holder Notes and Notes held by AAC and AFG) tendered and accepted in the AAC Offer.
Proration
: None.
|
Transaction Sequencing
|
On the Settlement Date, the consummation of the Offers will be deemed to occur in the following order for purposes of determining the amounts paid to each holder: (i) DPO Offer and (ii) AAC Sponsoring Holder Offer and AAC Offer concurrently.
|
Expiration Time; Acceptance
of Tenders |
The Offers will expire at 11:59 p.m., New York City time, on the day immediately preceding the Effective Date, unless extended or earlier terminated by AAC (the “
Expiration Time
”). Notes tendered prior to the Expiration Time may be withdrawn at any time at or prior to the Expiration Time but not thereafter. If AAC has a basis under the Definitive Documents to not accept any Notes tendered by a holder, and in fact does not accept such Notes, then such Notes will be returned to such holder, without cost, promptly after the Expiration Time or termination of the Offers, as applicable.
|
Waivers
|
Separate from the Offers, holders of more than 50% in aggregate principal amount of the Notes that cast a ballot shall execute and deliver, for no consideration, a waiver and amendment of certain provisions of the Settlement Agreement, dated as of June 7, 2010, between AFG, AAC, Ambac Credit Products, Inc. and certain settling policy beneficiaries, which will only become effective upon consummation of the Offers. See the form of BSA Waiver Agreement attached as Exhibit D.
|
19
|
See Step 3C of the Illustrative Transaction Mechanics presentation.
|
20
|
For the avoidance of doubt, $0.065 of each dollar of principal amount and accrued and unpaid interest thereon of each Note tendered and accepted in the AAC Offer will be surrendered as discount by the holder of such Note. Interest on the Notes will continue to accrue to, but not including, the Settlement Date.
|
Conditions Precedent to the Offers
|
Consummation of the Offers is subject to the following conditions precedent being satisfied or, in AAC’s sole discretion, waived:
•
Notes with a Total Value, as of the Settlement Date, of $202
21
million have been validly tendered and not withdrawn in the DPO Offer;
•
An aggregate of 85% participation by principal amount outstanding from holders of the Notes (including Notes held by AAC and AFG) in the Offers;
•
Receipt of the BSA Waiver Agreement executed by more than 50% of holders of the Notes that cast a ballot;
•
All conditions to the effectiveness of the amendment to the Original Plan (the “
Rehabilitation Plan Amendment
”) have been satisfied or waived, except for the condition that the Offers have been consummated, and the Rehabilitation Plan Amendment will become effective concurrently with the closing of Offers;
•
Receipt of any required approval of OCI and the Rehabilitation Court pursuant to applicable law and operative documents;
•
The Rehabilitation Exit Support Agreement has not been terminated;
•
The Offers have not been determined to violate any applicable law or interpretation of the staff of the Securities and Exchange Commission;
•
The absence of any statute, law, rule, regulation, judgment, order, decree or injunction which prohibits or prevents the closing of either of the Offers and/or the Rehabilitation Plan Amendment or any other transactions to be effected on the Settlement Date and necessary to the effectiveness of the Rehabilitation Plan Amendment; and
•
The existing fiscal agent of the Notes shall not have taken any action that would reasonably be expected to prevent the consummation of the Offers.
Consummation of the Offers is subject to the following conditions precedent being satisfied or, subject to the consent of AAC and Holders of 66 2/3% of the principal amount of the Notes, waived:
•
Receipt of the approval by OCI of a one-time current interest payment of approximately $12.5
22
million on the Notes outstanding immediately following the Effective Date.
|
21
|
Equal to 12.5% of the AAC Held DPO Amount.
|
22
|
To equal approximately six months of interest accrued on the Notes (assuming 100% participation by holders of the Notes in the offers).
|
23
|
For the avoidance of doubt, the 5.1% senior surplus notes due 2020 issued by the Segregated Account that are held by AFG will not receive any consideration in the Offers and will not be subject to any discount.
|
Secured Notes:
|
$[2,230,000,000]
24
initial principal amount of secured notes (the “
Secured Notes
”) issued by the Secured Notes Issuer. The Secured Notes will be in DTC book entry;
provided
that Secured Notes held by AAC (the “
AAC Secured Notes
”) will be in physical, registered form.
|
Secured Notes Issuer:
|
[Newco] (the “
Secured Notes Issuer
”), a newly formed special purpose entity, wholly owned by [an affiliate of Ambac Financial Group, Inc. (the “
Parent
”).]
25
|
Secured Noteholders:
|
Holders of General Account Senior Surplus Notes and Deferred Amounts (each as defined in the amendment to the Rehabilitation Plan of the Segregated Account of Ambac Assurance Corporation (“
AAC
”) (the “
Plan Amendment
”)).
|
Secured Notes Collateral:
|
All assets of the Secured Notes Issuer, including the Ambac Note (described below). AAC will pledge to the [Trustee/Fiscal Agent] for the benefit of Secured Noteholders (other than AAC) the proceeds of any AAC Secured Notes that it may from time to time hold in order to secure the Secured Notes Issuer’s obligations to such Secured Noteholders other than AAC. AAC will establish an account (the “
Principal Proceeds Collateral Account
”) that will be pledged to the [Trustee/Fiscal Agent] for the benefit of Secured Noteholders (other than AAC) into which AAC will deposit any proceeds of any AAC Secured Notes that it receives.
26
|
Secured Notes Policy:
|
AAC will issue a financial guaranty insurance policy (the “
Policy
”) to the [Trustee]/[Fiscal Agent] for the benefit of Secured Noteholders irrevocably guarantying all principal and interest payments (including mandatory prepayments) in respect of the Secured Notes as and when such payments become due and owing.
|
Ambac Note:
|
$[2,230,000,000]
27
initial principal amount of secured note (the “
Ambac Note
”) issued by the Ambac Note Issuer.
|
Ambac Note Issuer:
|
AAC (in its capacity as issuer of the Ambac Note, the “
Ambac Note Issuer
”).
|
Consideration for Ambac Note:
|
The Secured Notes Issuer will deliver the Secured Notes to the Ambac Note Issuer in exchange for the Ambac Note. The Ambac Note Issuer shall distribute the Secured Notes to the Secured Noteholders in accordance with the Plan Amendment and the exchange offer term sheet.
|
24
|
Amount subject to change. Estimated based on a calculation of 41.0% of the estimated amount of DPOs and SSNs outstanding as of June 30, 2018, with a slight adjustment for AFG holdings.
|
25
|
Subject to Ambac accounting review/confirmation.
|
26
|
Mechanics regarding the sweep of amounts in Principal Proceeds Collateral Account to be determined in Transaction Documents.
|
27
|
Amount subject to change. Estimated based on a calculation of 41.0% of the estimated amount of DPOs and SSNs outstanding as of June 30, 2018, with a slight adjustment for AFG holdings.
|
Ambac Note Collateral:
|
The Ambac Note will be secured by a pledge of (i) the Ambac Note Issuer’s right, title and interest in the cash and non-cash proceeds received by, or for the benefit of, it in connection with the RMBS Litigation (as defined below), pursuant to any final and non-appealable judgment, settlement or other arrangement, minus all amounts paid or payable to reimburse reinsurers for the amounts paid by reinsurers in connection with the receipt of such proceeds (but not the amount of any cost or fee (including legal fees) incurred in connection with the RMBS Litigation) (the “
Net Proceeds
”) in an amount up to, but not in excess of the Maximum RMBS Litigation Recovery Amount (the “
RMBS Proceeds
”) and (ii) RMBS securities having a market value of not less than $350 million on the date that is not more than 5 business days prior to the Closing Date (clauses (i) and (ii), together, the “
Ambac Note Collateral
”);
provided
that any principal received on the RMBS securities described in clause (ii) will, at AAC’s discretion, be either reinvested in securities of similar or better quality
28
and pledged in favor of the Secured Noteholders or be used to pay principal of the Ambac Note, and any interest received on such RMBS securities will be used to service interest falling due on the Ambac Note on the next Payment Date;
provided further
, that at all times, the Ambac Note Issuer and the Segregated Account will control the RMBS Litigation in all respects (including, without limitation, all decisions as to strategy, settlement, and pursuit). For the avoidance of doubt, the Ambac Note Issuer shall not transfer its right to receive the proceeds of the RMBS Litigation (except in connection with the Tier 2 Sale or any refinancing thereof, as permitted hereunder, in connection with contingency fee arrangements with counsel, or to any of its subsidiaries) or relinquish its control of the RMBS Litigation (including granting any consent rights) to any third party.
|
28
|
Asset types to be agreed in the Transaction Documents.
|
|
For the purposes of calculating the dollar amount of proceeds of RMBS Litigation received by, or for the benefit of, the Ambac Note Issuer, (i) the dollar amount of proceeds received directly by the Ambac Note Issuer in cash will be deemed to equal the amount of such cash, (ii) the dollar amount of any non-cash proceeds received directly by the Ambac Note Issuer shall be deemed to equal the fair value of such non-cash proceeds and (iii) the dollar amount of any cash or noncash proceeds received by others for the benefit of the Ambac Note Issuer (“
indirect proceeds
”) will be deemed to equal the fair value to the Ambac Note Issuer of such indirect proceeds. For purposes of (ii) and (iii) above, the fair value shall be as determined by a third-party appraiser mutually acceptable to the Ambac Note Issuer and a majority of the Secured Noteholders (other than AAC), and the terms of such third-party appraisal shall be specified in the Transaction Documents (such value described in (i), (ii) and (iii) above, the “
Cash Value
”).
29
The Ambac Note Issuer will establish an account (the “
Cash Collateral Account
”) that will be pledged to secure the Ambac Note into which the Ambac Note Issuer will instruct the payor of any cash Net Proceeds to be paid.
30
In the event the Ambac Note Issuer receives any Net Proceeds paid in cash, it will deposit such cash Net Proceeds into the Cash Collateral Account as soon as reasonably practicable and in no event later than 4 business days after its receipt. In the event the Ambac Note Issuer receives (directly or indirectly) any Net Proceeds in any other form, it will deposit the Cash Value thereof into the Cash Collateral Account within 4 business days after receipt of the appraisal. The aggregate amount of Net Proceeds paid into the Cash Collateral Account shall not exceed the Maximum RMBS Litigation Recovery Amount.
|
RMBS Litigation:
|
Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 651612/2010 (N.Y. Sup. Ct. N.Y. Cnty.) (Bransten, J.); Ambac Assurance Corp. et al. v. First Franklin Fin. Corp. et al., Index No. 651217/2012 (N.Y. Sup. Ct. N.Y., Cnty.) (Singh, J.); Ambac Assurance Corp. et al., v. Nomura Credit & Capital, Inc. et al., Index No. 651359/2013 (N.Y. Sup. Ct. N.Y., Cnty.); Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 653979/2014 (N.Y. Sup. Ct. N.Y. Cnty.) (Friedman, J.); Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc., No. 14 CV 3511 (Wis. Cir. Ct. Dane Cnty.) (Anderson, J.); and Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 652321/2015 ( N.Y. Sup. Ct. N.Y. Cnty.) (Friedman, J.) (collectively with any successor proceeding against the same parties (or any of their successors) with respect to substantially the same claims, the “
RMBS Litigation
”).
|
Maximum RMBS Litigation Recovery Amount:
|
$1,400,000,000.
|
29
|
Prior to the Closing Date, the identity of the third-party appraiser (or a list of acceptable third-party appraisers) shall be determined by the Ambac Note Issuer and a majority of the holders of General Account Senior Surplus Notes who are signatories to the Rehabilitation Exit Support Agreement. Following the Closing Date, any successor third-party appraiser shall be determined as provided above.
|
30
|
Any additional mechanics regarding the deposit of Net Proceeds to be determined in Transaction Documents.
|
Maturity:
|
The Secured Notes and the Ambac Note will mature on [●], [2022]
31
(the “
Maturity Date
”);
provided
that if (i) Secured Notes remain outstanding and (ii) the Office of the Commissioner of Insurance approves payment of the outstanding principal amount of the Remaining SSNs, the maturity date for the Secured Notes will spring to the fifth business day immediately preceding the date approved for such payment. All outstanding principal and accrued unpaid interest in respect of the Secured Notes and the Ambac Note will be due and payable on the Maturity Date.
|
Payment Dates:
|
Quarterly on [ ], [ ], [ ] and [ ] of each calendar year until the Maturity Date.
|
Record Dates:
|
[ ]
|
Coupon:
|
The Secured Notes and the Ambac Note will accrue interest at a per annum rate of 3-month USD LIBOR + 5.00%, subject to a 1.00% LIBOR floor. Accrued unpaid interest will be paid in cash on each Payment Date.
|
Mandatory Prepayment:
|
On or prior to the 5th business day after RMBS Proceeds are received by the Ambac Note Issuer or indirect proceeds are paid for the benefit, in whole or in part, of the Ambac Note Issuer (each such day, a “
Mandatory Payment Date
”), the Ambac Note Issuer will prepay the Ambac Note in cash in an amount equal to the lower of (i) the remaining outstanding amount of the Ambac Note and (ii) the Cash Value of such RMBS Proceeds received by or for the benefit of AAC,
first
, to pay accrued unpaid interest on the Ambac Note and,
second
, to pay outstanding principal of the Ambac Note.
|
Principal and Interest Payments:
|
Interest on the Secured Notes and the Ambac Note will accrue from the date of issuance and will be paid on each Payment Date, Optional Payment Date (as defined below) and Mandatory Payment Date.
On each Payment Date, Optional Payment Date and Mandatory Payment Date, the Secured Notes Issuer will apply all cash payments received on such Payment Date, Optional Payment Date or Mandatory Payment Date, as applicable, from the Ambac Note Issuer on account of (i) interest to pay accrued unpaid interest on the Secured Notes as at such Payment Date, Optional Payment Date or Mandatory Payment Date, as the case may be, and (ii) principal to pay the outstanding principal of the Secured Notes.
32
The Secured Notes Issuer will make all such payments to Secured Noteholders on a pro rata, pari passu basis.
On the Maturity Date, the Ambac Note Issuer will pay, in cash on a full recourse basis, all principal and accrued unpaid interest then outstanding under the Ambac Note. On the Maturity Date, the Secured Notes Issuer will pay, in cash on a full recourse basis, all principal and accrued unpaid interest then outstanding under the Secured Notes.
|
Payment Preference:
|
The Ambac Note will rank senior to all surplus notes of AAC. Claims under the Policy will rank pari passu with other policyholder claims.
|
31
|
NTD: A date five (5) years from the date of issue.
|
32
|
AAC to indemnify/reimburse the Secured Notes Issuer for fees, costs, expenses and indemnities required to be paid by the Secured Notes Issuer under the Transaction Documents.
|
Optional Prepayments:
|
The Ambac Note (including any accrued unpaid interest thereon) may be redeemed in whole, or in part, at the option of the Ambac Note Issuer on any Payment Date (an “
Optional Payment Date
”), without penalty or premium. On the Optional Payment Date, the Secured Notes Issuer shall apply the proceeds of such optional redemption in repayment of the Secured Notes (including any accrued unpaid interest thereon) without penalty or premium.
|
Closing Date:
|
The effective date of the Plan Amendment.
|
Agreed Tax Treatment:
|
For federal, state and local income tax purposes, AAC and the Secured Notes Issuer, and by accepting the Secured Notes, the Secured Noteholders, will agree to treat the Secured Notes and the Ambac Note as indebtedness of Ambac.
|
Conditions Precedent:
|
•
Satisfaction or waiver of the conditions to effectiveness set forth in the Plan Amendment and the effectiveness of the Plan.
•
Execution of the Transaction Documents (as defined below) reflecting the terms and conditions set forth herein and other agreed terms and conditions.
•
Delivery of legal opinions customary for a transaction of this type.
|
Ambac Note Issuer Events of Default:
|
•
Failure of the Ambac Note Issuer to pay principal (other than at maturity) when due;
provided
that in the case of a failure to pay principal (other than at maturity) when due as a result of an administrative or technical error or omission such failure continues for 3 business days.
•
Failure of the Ambac Note Issuer to pay interest or other amounts (other than principal) in each case within 3 business days after such interest or other amount is due and unpaid.
•
Failure of the Ambac Note Issuer to pay principal at maturity.
•
Certain events of insolvency/rehabilitation/liquidation of the Ambac Note Issuer.
|
Secured Notes Issuer Events of Default:
|
•
Ambac Note Issuer Event of Default.
•
Failure of AAC to honor a valid claim for principal of the Secured Notes under the Policy or failure of AAC to honor a valid claim for interest on the Secured Notes under the Policy in each case within 3 business days after receipt of a claim for payment.
•
Certain events of insolvency/rehabilitation/liquidation of the Secured Note Notes Issuer.
•
Failure to comply with the Secured Note Issuer covenants set forth in the Transaction Documents or inaccuracy of representations of the Secured Note Issuer in any material respect set forth in the Transaction Documents and such failure or inaccuracy is curable and not cured within 30 days after the earlier of (i) the day of written notice to the Secured Notes Issuer of such failure or inaccuracy and (ii) the day on which the Secured Notes Issuer becomes aware of such failure or inaccuracy.
|
Remedies for Secured Notes Issuer Events of Default
|
•
Secured Noteholders may demand payment under the Policy of principal or interest that is due and unpaid on the Secured Notes.
|
Remedies for Failure to Pay Under Policy:
|
•
Right to foreclose on RMBS securities constituting Ambac Note Collateral (and any other securities acquired with the proceeds of RMBS securities).
•
Right to sue for failure to make payments.
•
Remedies will not include any control, consultation or direction rights in respect of the RMBS Litigation.
•
Secured Noteholders may not sell the Ambac Note or the right to receive the RMBS Proceeds without the prior consent of AAC.
•
Any proceeds received from the exercise of remedies under the Transaction Documents will be applied to reduce both the amount of the Ambac Note and the Secured Notes.
|
Covenants:
33
|
Affirmative and negative covenants shall include those that are customary for a transaction of this type, including, subject to those customary qualifications, those with respect to (i) payment, (ii) maintenance of paying agent, (iii) restriction on merger or consolidation, (iv) maintenance of perfection and priority of security interest in the collateral, (v) maintenance of priority in payment of the Secured Notes and the Ambac Note, (vi) restriction on the Secured Notes Issuer engaging in any business or having any assets (other than the collateral) or liabilities (other than the Secured Notes), (vii) maintenance of separate existence of the Secured Notes Issuer, (viii) restriction on sale or other transfer of the collateral, (ix) AAC’s agreement to pursue the RMBS Litigation diligently, in good faith, and in a manner consistent with a plaintiff acting solely on its own account and (x) delivery of progress reports of material, non-privileged and public information in respect of the RMBS Litigation and notices of non-privileged and public material developments of any RMBS Litigation in each case on a quarterly basis.
34
|
Governing Law:
|
New York
|
Other:
|
Customary provisions regarding consent to exclusive jurisdiction in New York, waiver of jury trial, service of process and other miscellaneous matters.
|
Transaction Documents:
|
Secured Notes, Credit Agreement, Ambac Note, Ambac Security Agreement, Secured Notes Indenture, Secured Note Issuer Security Agreement, Exchange Documents, Insurance Agreement, Policy, Cash Collateral Account Control Agreement, Securities Account Control Agreement, Principal Proceeds Collateral Account Control Agreement, offering document, and other documents and opinions reasonably requested by the Secured Noteholders (including a nonconsolidation opinion reasonably acceptable to AAC and the Secured Noteholders).
|
33
|
No requirement to report privileged or confidential information.
|
34
|
Covenants to be included in the Indenture and Credit Agreement, as applicable.
|
Registration:
|
The Secured Notes will not be registered under the Securities Act of 1933, as amended.
|
Investment Company Act:
|
The Secured Notes Issuer will be exempt from registration under Rule 3(c)(7) of the Investment Company Act of 1940.
|
35
|
Exhibit A to include all term sheets (e.g., plan amendment, exchange, and secured note) and presentations (e.g., illustrative transaction mechanics) describing the transaction that will be publicly disclosed.
|
1.
|
Elimination of Unaffiliated Qualified Director Requirement
.
|
a.
|
Sections 3.04(a) and (b) of the BSA shall be deleted in its entirety and replaced with the following: “Intentionally omitted”.
|
b.
|
Any and all references to “Unaffiliated Qualified Directors”, including without limitation requirements or conditions that the approval of a majority of Unaffiliated Qualified Directors may be required for any action or other matter, shall be deemed inoperative and of no further force or effect for all purposes.
|
c.
|
Section 1.01 of the BSA shall be amended by deleting the definitions of “Unaffiliated Qualified Directors”, “Qualified” and “Unaffiliated” in their entirety.
|
2.
|
Elimination of Prohibition on New Business
.
|
a.
|
Section 3.04(d) of the BSA shall be deleted in its entirety and replaced with the following: “Intentionally omitted”.
|
3.
|
Refinement of Permitted Indebtedness Restriction
.
|
a.
|
Section 3.04(e) of the BSA shall be amended and restated in its entirety as follows:
|
b.
|
Section 1.01 of the BSA shall be amended to add the following definitions:
|
4.
|
Allowance of Liens Securing Permitted Indebtedness
.
|
a.
|
The definition of “Permitted Liens” in Section 1.01 of the BSA shall be amended and restated in its entirety as follows:
|
5.
|
Additional Flexibility for Junior Surplus Notes
.
|
a.
|
Section 3.04(f) of the BSA shall be amended and restated in its entirety as follows:
|
6.
|
Additional Flexibility for Merger of AAC Subsidiaries
.
|
a.
|
Section 3.04(h)(ii) of the BSA shall be amended and restated in its entirety to read as follows:
|
Principal Amount of Senior Surplus Notes Owned:
|
$[●]
|
Accrued and Unapproved Interest on Senior Surplus Notes Owned:
|
$[●]
|
Total Senior Surplus Notes Owned:
|
$[●]
|
|
|
Principal Amount Holder Deferred Amounts Owned:
|
$[●]
|
Accrued and Unpaid Payments on Holder Deferred Amounts Owned:
|
$[●]
|
36
|
To be signed by the fund or investor beneficially owning the Deferred Amounts and/or Senior Surplus Notes.
|
Company Purchases/Sales Since January 1, 2017
|
||||||||||||||||
CUSIP
|
Name
|
Type
|
Transaction
|
Trade Date
|
Par
|
Accretion
|
Par + Accretion
|
Price Paid
|
||||||||
74529JAP0
|
PR S/TAX-CABS-A
|
PR
|
Purchase
|
3/22/2017
|
|
$488,535,000
|
|
—
|
|
|
$488,535,000
|
|
|
$56,914,328
|
|
|
Total
|
|
|
|
|
|
$488,535,000
|
|
|
$0
|
|
|
$488,535,000
|
|
|
$56,914,328
|
|
Parent Purchases/Sales Since January 1, 2017
|
||||||||||||||||
CUSIP
|
Name
|
Type
|
Transaction
|
Trade Date
|
Par
|
Accretion
|
Par + Accretion
|
Price Paid
|
||||||||
N/A
|
Weinstein SA Notes
|
SA SN
|
Purchase
|
3/7/2017
|
$
|
36,888,218
|
|
$
|
14,431,115
|
|
$
|
51,319,333
|
|
$
|
45,468,929
|
|
023138AA8
|
General Account Notes
|
GA SN
|
Purchase
|
3/24/2017
|
10,000,000
|
|
4,025,697
|
|
14,025,697
|
|
12,300,000
|
|
||||
N/A
|
DPO (Exc)
|
DPO
|
Purchase
|
3/27/2017
|
73,033,728
|
|
18,428,010
|
|
91,461,738
|
|
0
37
|
|
||||
023138AA8
|
General Account Notes (Exc)
|
GA SN
|
Sale
|
3/27/2017
|
64,750,000
|
|
26,091,116
|
|
90,841,116
|
|
0
|
|
||||
023138AA8
|
General Account Notes
|
GA SN
|
Purchase
|
3/31/2017
|
23,608,320
|
|
9,517,518
|
|
33,125,838
|
|
29,038,242
|
|
||||
219639AA9
|
Corolla Trust Notes
38
|
JSN
|
Purchase
|
7/19/2017
|
45,000,000
|
|
6,986,483
|
|
51,986,483
|
|
38,137,500
|
|
||||
N/A
|
Option to Purchase Corolla Trust Notes
39
|
JSN
|
Purchase
|
7/19/2017
|
45,000,000
|
|
6,986,483
|
|
51,986,483
|
|
10,878,750
|
|
||||
Total
|
|
|
|
|
$
|
298,280,266
|
|
$
|
86,466,422
|
|
$
|
384,746,688
|
|
$
|
135,823,421
|
|
37
|
Note: The DPOs were swapped for the General Account Notes in the line below.
|
38
|
Note: Accretion values for the Corolla Trust Notes and Option to Purchase Corolla Trust Notes are based on 7/19/2017 values.
|
39
|
Note: This is an option to purchase the amount of Corolla Trust Notes reflected in the chart and the price paid noted in the chart only reflects the purchase price of the option and does not reflect the price that will be paid if the option is exercised. The Corolla Trust Notes subject to the option have not been purchased.
|
TO:
|
Ambac Assurance Corporation
One State Street Plaza New York, NY 10004 |
(
a
)
|
such Investor has all necessary corporate, limited partnership or limited liability company, as applicable, power and authority to execute and deliver this Letter Agreement and to perform its obligations hereunder,
|
(
b
)
|
the execution, delivery and performance of this Letter Agreement by such Investor has been duly authorized by all necessary action on its part,
|
(
c
)
|
this Letter Agreement has been duly and validly executed and delivered by such Investor and constitutes a valid and legally binding obligation of such Investor,
|
(
d
)
|
the execution, delivery, and performance by it of this Letter Agreement does not (
i
) violate any provision of law, rule, or regulation applicable to it or its certificate of incorporation or by-laws (or other organizational documents) or (
ii
) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation to which it is a party,
|
(
e
)
|
the execution, delivery and performance by it of this Letter Agreement does not and shall not require any registration or filing by it with, consent or approval of, notice to, or other action to, with, or by, any Federal, State or other governmental authority or regulatory body, except such filings made prior to the date hereof and except for consents or approvals that have been obtained prior to the date hereof,
|
(
f
)
|
this Letter Agreement is the legally valid and binding obligation of it, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability,
|
(
g
)
|
no litigation or proceeding before any court, arbitrator, or administrative or governmental body is pending against it that would adversely affect its ability to enter into this Agreement or perform its obligations under this Letter Agreement and the Term Sheet,
|
(
h
)
|
the Commitment is less than the maximum amount that such Investor is permitted to invest in any one investment pursuant to the terms of its constituent documents,
|
(
i
)
|
such Investor has, or will have on the Issue Date, sufficient funds to fund the Commitment;
|
(
j
)
|
such Investor is either (
i
) an “institutional accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) of the Securities Act, (
ii
) a “qualified institutional buyer” within the meaning of Rule 144A of the Securities Act, or (
iii
) a non-U.S. person within the meaning of Rule 902 of the Securities Act;
|
(
k
)
|
such Investor (
i
) is a sophisticated investor with respect to the transactions described herein with knowledge and experience in financial and business matters sufficient to evaluate the merits and risks of owning and investing in securities similar to the Notes, making an informed decision with respect thereto, and evaluating properly the terms and conditions of this Agreement, and it has made its own analysis and decision to enter in this Agreement, (
ii
) acknowledges receipt of the risk factors attached hereto as Annex II, (
iii
) has had the opportunity to meet with management of the Issuer and to ask questions and review information with respect to the Issuer’s business, financial condition, results of operations and financial and operational outlook (including the Issuer’s public disclosures), and it has obtained all information it deems necessary or appropriate in order to enter into this Agreement and make the investment decision contemplated hereby and (
iv
) acknowledges that neither the Issuer nor any of its affiliates are making any representation, warranty, covenant or
|
(
l
)
|
such Investor acknowledges that the Notes will be subject to restrictions on transfer as set forth in the Term Sheet.
|
(
a
)
|
the Issuer has all necessary corporate power and authority to execute and deliver this Letter Agreement and to perform its obligations hereunder;
|
(
b
)
|
the execution, delivery and performance of this Letter Agreement by the Issuer has been duly authorized by all necessary action on its part;
|
(
c
)
|
this Letter Agreement has been duly and validly executed and delivered by the Issuer and constitutes a valid and legally binding obligation of the Issuer;
|
(
d
)
|
the execution, delivery, and, subject to all required approvals by the applicable regulatory authorities prior to the Issue Date and to the effectiveness of the Plan Amendment, performance by it of this Letter Agreement does not (
i
) violate any provision of law, rule, or regulation applicable to it or its certificate of incorporation or by-laws (or other organizational documents) or (
ii
) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation to which it is a party;
|
(
e
)
|
the execution, delivery and, subject to all required approvals by the applicable regulatory authorities prior to the Issue Date and to the effectiveness of the Plan Amendment, performance by it of this Letter Agreement does not and shall not require any registration or filing by it with, consent or approval of, notice to, or other action to, with, or by, any Federal, State or other governmental authority or regulatory body, except such filings made prior to the date hereof and except for consents or approvals that have been obtained prior to the date hereof;
|
(
f
)
|
this Letter Agreement is the legally valid and binding obligation of it, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability;
|
(
g
)
|
no litigation or proceeding before any court, arbitrator, or administrative or governmental body is pending against it that would adversely affect its ability to enter into this Agreement or perform its obligations under this Letter Agreement and the Term Sheet;
|
(
h
)
|
The financial guaranty claim payments and Deferred Loss Amounts (as defined in that certain Plan of Rehabilitation, as amended, effective as of June 12, 2014, as further amended and/or clarified from time to time) set forth in the spreadsheet provided to each of the Investors on July 14, 2017 and referenced in columns “ETD Claims Paid (net of subrogation)” and “ETD Deferred Amount” respectively represent in all material respects an accurate summary of the paid portions of permitted policy claims (net of subrogation) and the unpaid portions of permitted policy claims, respectively, received by, and recorded on the books
|
(
i
)
|
to the Issuer’s knowledge, the gross remediation credit of $1,893 million (net of reinsurance) for representation and warranty recoveries that is included in Issuer’s financial statements as of March 31, 2017 was an accurate estimate when made in all material respects and the Issuer has no knowledge of any development which would reasonably be expected to materially decrease such gross remediation credit in the financial statements for the period ending June 30, 2017; and
|
(
j
)
|
the Issuer has not reached any agreements or understandings with respect to the principal terms of a settlement of any of the RMBS Litigations.
|
Investor
1
|
Commitment
|
Canyon Capital Advisors LLC
|
$[intentionally omitted]
|
Centerbridge Credit Partners Master, L.P., Centerbridge Credit Partners, L.P., Centerbridge Special Credit Partners II, L.P., Centerbridge Special Credit Partners, L.P.
|
$[intentionally omitted]
|
Davidson Kempner Capital Management, LP
|
$[intentionally omitted]
|
GoldenTree Asset Management LP
|
$[intentionally omitted]
|
Aggregate Commitment
|
$240,000,000
|
1
|
For each Investor (other than Centerbridge Credit Partners Master, L.P., Centerbridge Credit Partners, L.P., Centerbridge Special Credit Partners II, L.P. and Centerbridge Special Credit Partners, L.P.), the commitment amount listed is the aggregate commitment for certain of the funds and accounts for which such Investor serves as investment manager.
|
Security Description
|
Ambac Assurance Corp senior notes (the “
Notes
”), secured by the junior interests in the RMBS Litigations specified herein.
|
Issuer:
|
Ambac Assurance Corporation (“
AAC
”)
|
Format:
|
The Notes will be issued in a section 4(a)(2) private placement. The Notes will be in DTC book entry.
|
Fiscal Agent / Trustee / Initial Purchaser (for DTC eligibility):
|
TBD
|
Issue Date:
|
The effective date of the Plan Amendment.
|
Ticking Date:
|
60 days after the Commitment Date.
|
Final Maturity Date:
|
The same date and month as the Issue Date in the year 2055.
|
Principal Amount:
|
$240,000,000
|
Commitment Fee:
|
2.5% of the Principal Amount, payable in cash upon execution of a binding commitment letter satisfactory to AAC to which this term sheet is attached (the “
Commitment Date
”).
|
Ticking Fee:
|
3.5% of the Principal Amount per annum, payable monthly in cash from the Ticking Date until the earliest of (i) the Issue Date, (ii) the rejection of the Plan Amendment by the applicable insurance regulator, and (iii) termination of the applicable commitment letter following the resolution of Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 651612/2010 (N.Y. Sup. Ct. N.Y. Cnty.) (Bransten, J.) or the termination of that certain Rehabilitation Exit Support Agreement, by and among AAC, Ambac Financial Group, Inc. and certain holders of securities party thereto, dated as of the date of the applicable commitment letter;
provided
that, in the event of a termination pursuant to clauses (ii) or (iii), the minimum number of months of ticking fee payable shall be 3 months.
|
Interest Accrual Rate:
|
Interest shall accrue from but excluding the Issue Date at 8.5% per annum and shall be calculated on an annual, 30/360 basis. Interest payments will not be made in cash on interest payment dates and shall be paid-in-kind and compounded on each Interest Accrual Date, unless (i) funds are available to make such payments in cash in the manner described in Payment of Interest and Principal section below or (ii) interest is paid in cash in respect of the Reference Surplus Notes (other than payments in connection with the Plan Amendment as described in the Surplus Note Distribution Percentage section).
|
Interest Accrual Date:
|
The last day of each calendar quarter.
|
Payment of Interest and Principal:
|
AAC will make payments as follows:
1) Upon receipt of any Tier 2 Net Proceeds (as defined below) by AAC and provided that the Initial Call Date has occurred, AAC shall be obliged to prepay the Notes on the next occurring Payment Date with such Tier 2 Net Proceeds by applying such proceeds; first, against any and all outstanding accrued and unpaid interest amounts due and payable on the Notes, and second, against any outstanding unpaid principal balance on the Notes.
2) In the event that a payment (other than payments in connection with the Plan Amendment as described in the Surplus Note Distribution Percentage section) is made on the Reference Surplus Notes (as defined below) (a “
SSN Payment Date”)
and provided that the Initial Call Date has occurred, AAC shall be obliged to prepay the Notes on the next occurring Payment Date in an amount (the “
SSN Payment
”) equal to: a) the then outstanding accrued and unpaid interest and principal balance of the Notes, multiplied by b) the Surplus Note Distribution Percentage, as defined below and by applying such proceeds: first, against any and all outstanding accrued and unpaid interest amounts due and payable on the Notes, and second, against any outstanding unpaid principal balance on the Notes. For the avoidance of doubt, it is contemplated that there can be multiple such distributions (in the event of multiple regulator approved payments to the Reference Surplus Notes).
In the event of a SSN Payment Date prior to the scheduled maturity date of the Reference Surplus Notes that includes a principal payment on such Reference Surplus Notes, occurring prior to the one year anniversary of a payment of principal on the Notes (a “Recent Principal Payment”) and provided that the Initial Call Date has occurred, in lieu of making an SSN Payment as calculated in the foregoing paragraph, AAC shall be obliged to make a SSN Payment equal to: a) the outstanding accrued and unpaid interest and principal balance of the Notes immediately prior to the Recent Principal Payment, multiplied by b) the Surplus Note Distribution Percentage, as defined below and by applying such proceeds: first, against any and all outstanding accrued and unpaid interest amounts due and payable on the Notes, and second, against any outstanding unpaid principal balance on the Notes. For the avoidance of doubt, it is contemplated that there can be multiple such distributions (in the event of multiple regulator approved payments to the Reference Surplus Notes).
3) At the Final Maturity Date, or on any Early Termination Date on which the Notes are to be redeemed in whole, payment of the then outstanding interest and principal balance of the Notes, in full
4) On any Early Termination Date on which the Notes are to be redeemed in part, the interest and principal outstanding on the Notes to be redeemed and any applicable Make-Whole Premium.
|
Payment Preference:
|
The Notes will constitute secured debt to the extent of the value of the Account, and any unsecured portion of the Notes in a liquidation of AAC will constitute class 5 claims under Wisc. Stat. 645.68.
|
Payment Dates:
|
Payment Dates shall include: 1) 5 business days after; a) receipt by AAC of Tier 2 Net Proceeds, or b) a SSN Payment Date (in either case subject to the Call Protection provision), 2) any Early Termination Date, and 3) the Final Maturity Date, in each case, as applicable.
For the avoidance of doubt, to the extent that an SSN Payment Date or receipt of Tier 2 Net Proceeds occurs prior to the Initial Call Date, the first date that payment shall actually be required to be made in respect of such SNN Payment Date or receipt of Tier 2 Net Proceeds shall be the Initial Call Date, and the Issuer shall be required to comply with the Account funding requirements in the Call Protection section in the interim in lieu of making such payment on such Payment Date.
|
Reference Surplus Notes:
|
Senior Surplus Notes, bearing 5.1% interest, with a scheduled maturity date of June 7, 2020 issued by AAC, ISIN 023138AA88
|
Surplus Note Distribution Percentage:
|
Upon any SSN Payment Date, the Surplus Note Distribution Percentage shall be equal to the percentage calculated as: (i) the amount of payments to be made on the Reference Surplus Notes on such SSN Payment Date, as the numerator, over (ii) the outstanding unpaid interest and principal balance of the Reference Surplus Notes immediately prior to such distribution, as the denominator.
Note that, for the purpose of determining the Surplus Note Distribution Percentage, any payments to the Surplus Notes made in connection with the transactions relating to the exit of the Segregated Account of AAC from rehabilitation (the “
Plan Amendment
”) are excluded (i.e., the Reference Surplus Note balance is considered to be 100% following any payments made on or before or in connection with the Issue Date).
|
Control and Covenants Related to the RMBS
Litigation: |
At all times, AAC and the Segregated Account (if not merged with and into AAC) will control the RMBS Litigation in all respects (including, without limitation, all decisions as to strategy, settlement, pursuit and abandonment), and the holders of the Notes shall have no right to join or participate in the RMBS Litigation in any way.
No holder of the Notes or of any beneficial interest in the Notes shall have any third party beneficiary rights under, relating to or in respect of the RMBS Litigation. Each such holder shall agree not to, and shall procure that none of its affiliates, representatives, employees, directors, shareholders or agents shall, take any action, whether direct or indirect, that is intended to, or could be reasonably expected to, interfere with, or influence the value, settlement discussions, legal arguments, timing of, the prosecution or resolution, in any way whatsoever, any RMBS Litigation or other litigation to which AAC or the Segregated Account is a party.
For the term of these Notes, AAC will covenant not to sell or otherwise transfer to any third party any of its ownership of the Net Proceeds in excess of $1.6 billion (other than in connection with contingency fee arrangements with counsel).
|
Early Termination:
|
AAC may voluntarily prepay the Notes, in whole or in part, (i) on the Initial Call Date or thereafter without penalty; or (ii) prior to the Initial Call Date, pursuant to the provisions set out in the Call Protection section (any such prepayment date, an “
Early Termination Date
”). In the event of such a voluntary prepayment, any amounts paid will be applied; first to accrued and unpaid interest under the Notes to be redeemed, and second to the unpaid principal balance of the Notes to be redeemed. Subject to the provisions set forth in the Call Protection Section, there are no prepayment penalties.
For the avoidance of doubt, in the event AAC receives Tier 2 Net Proceeds in an amount greater than amounts due under the Notes (including the receipt of Tier 2 Proceeds after the full satisfaction of the Notes), AAC shall not be required to pay such excess Tier 2 Net Proceeds to the holders of the Notes or any other third party. The Notes are entitled solely to unpaid principal and accrued interest amounts thereon.
|
Call Protection:
|
To the extent there is an SSN Payment Date or receipt of Tier 2 Net Proceeds in advance of the Initial Call Date (as defined below), a separate account (the “
Account
”) will be funded on the date that would have been the next occurring Payment Date (but for the application of this Call Protection Provision) with amounts equal to any Tier 2 Net Proceeds and/or SSN Payments which would have been applied in redemption of the Notes but for the application of this Call Protection provision (including the applicable Make-Whole Premium). Notwithstanding the occurrence of a Payment Date, except as provided below, the Notes may not be redeemed or repaid prior to Initial Call Date. Thereafter, as set forth under the Early Termination section, the Notes may be redeemed, in whole or in part, at the option of the Issuer, at a price equal to 100% of the aggregate principal amount redeemed, plus accrued and unpaid interest, if any.
The Account will be pledged to secure the Notes and will be subject to an account control agreement in favor of the noteholders.
|
|
AAC’s obligation to pre-fund such amounts will be subject to a maximum amount equal to the sum of the aggregate principal amount of all outstanding Notes and the applicable Make-Whole Premium on all such Notes (the “
Maximum Amount
”). The Account, which will be pledged as security for the Notes, can be funded with cash, or with fixed-income assets (subject to the guidelines detailed on Exhibit A hereto). If the Maximum Amount has been funded in the Account, (i) any Tier 2 Net Proceeds in excess of the Maximum Amount shall be exclusively for the account of AAC and the lien over the remaining Tier 2 Net Proceeds shall be, immediately and without further action, released; and (ii) there shall be no further obligation to redeem any of the Notes, or fund the Account, as a consequence of any payment on the Reference Surplus Notes, any further receipt of Tier 2 Net Proceeds or any diminution of value of the Account (though, for the avoidance of doubt, such diminution shall in no event reduce the amount owed in respect of the Notes). If and only if the Account has been funded in excess of the Maximum Amount, AAC may, in its sole discretion, withdraw such excess from the Account for its general use, free and clear of any liens for the benefit of the noteholders.
|
|
At any time and from time to time AAC may also, in its sole discretion, collateralize any amount of Notes by funding the Account with any source of cash or Eligible Investments (as defined on Exhibit A) in an amount equal to the principal amount of such Notes, all accrued and unpaid interest thereon, and the Make-Whole Premium that would have been payable if such Notes were redeemed on the date of such funding;
provided
, that all such collateralized Notes shall be repaid (without premium or penalty) on the Initial Call Date if they are not redeemed prior to such Initial Call Date with their applicable Make-Whole Premium on such prior date.
|
|
Prior to the Initial Call Date, AAC may at its option (including, for the avoidance of doubt, through the use of Tier 2 Net Proceeds or SSN Payments as an alternative to funding the Account, or any other source of available cash) redeem the Notes in whole or in part, on one or more occasions, at a redemption price equal to 100% of the aggregate principal amount to be redeemed plus accrued and unpaid interest thereon, if any, and a make-whole premium based on the present value of all required and remaining scheduled interest payments (taking into account compounding on each scheduled interest payment date) due on such Notes to be redeemed through the Initial Call Date, computed using a discount rate equal to the yield on U.S. Treasury notes with a maturity closest to the Initial Call Date plus 50 basis points (the “
Make-Whole Premium
”).
|
|
“
Initial Call Date
” means the 39
th
month anniversary of the Ticking Date, which such date shall be automatically extended on each month anniversary of the Issue Date after the one year anniversary of the Issue Date, on a ratable basis, to (i) the 48
th
month anniversary of the Ticking Date by the second year anniversary of the Issue Date and (ii) the 54
th
month anniversary of the Ticking Date by the third year anniversary of the Issue Date;
provided
that for any given redemption or repayment of principal on the Notes (in whole or in part), the Initial Call Date for such principal to be redeemed or repaid shall be determined as of the earlier of the date of such redemption or repayment and the date that an amount equal to the amount of principal
2
to be redeemed or repaid was funded (in the form of cash or Eligible Investments (as defined on Exhibit A)) into the Account. For the avoidance of doubt, for any given redemption or repayment of principal on the Notes, there shall be no extensions of the Initial Call Date for such redemption or repayment after the earlier of the third year anniversary of the Issue Date and
the date that an amount equal to the amount of principal to be redeemed or repaid was funded (in the form of cash or Eligible Investments (as defined on Exhibit A))
.
|
2
|
For the avoidance of doubt, such principal must always be funded into the Account along with any accrued and unpaid interest thereon plus the Make-Whole Premium that would have been payable if such Notes were redeemed on the date of such funding.
|
RMBS Litigations:
|
Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 651612/2010 (N.Y. Sup. Ct. N.Y. Cnty.) (Bransten, J.); Ambac Assurance Corp. et al. v. First Franklin Fin. Corp. et al., Index No. 651217/2012 (N.Y. Sup. Ct. N.Y., Cnty.) (Singh, J.); Ambac Assurance Corp. et al., v. Nomura Credit & Capital, Inc. et al., Index No. 651359/2013 (N.Y. Sup. Ct. N.Y., Cnty.); Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 653979/2014 (N.Y. Sup. Ct. N.Y. Cnty.) (Friedman, J.); Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc., No. 14 CV 3511 (Wis. Cir. Ct. Dane Cnty.) (Anderson, J.); and Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 652321/2015 (N.Y. Sup. Ct. N.Y. Cnty.) (Friedman, J.) (collectively with any successor proceeding against the same parties (or any of their successors) with respect to substantially the same claims, the “
RMBS Litigation
”).
|
Net Proceeds:
|
“
Net Proceeds
” are equal to (i) the Total Proceeds minus (ii) all amounts paid or payable to reinsurers in connection with the receipt of the Total Proceeds.
|
Tier 2 Net Proceeds:
|
“
Tier 2 Net Proceeds
” are equal to 100% of all Net Proceeds in excess of $1.6 billion.
The Notes shall be secured by the right to receive Tier 2 Net Proceeds.
|
Total Proceeds:
|
“
Total Proceeds
” will consist of the dollar amount of proceeds of the RMBS Litigation received pursuant to any final and non-appealable judgment, settlement or other arrangement by AAC at any time during the period commencing on the Issue Date and ending on and including the Termination Date. For purposes of calculating the dollar amount of proceeds, (i) the dollar amount of proceeds received directly by AAC in cash will be deemed to equal the amount of such cash, (ii) the dollar amount of any non-cash proceeds received directly by AAC shall be deemed to equal the fair value of such non-cash proceeds and (iii) the dollar amount of any cash or non-cash proceeds received by others for the benefit, in whole or in part, of AAC (“
indirect proceeds
”) will be deemed to equal the fair value to AAC of such indirect proceeds. For purposes of (ii) and (iii) above, the fair value shall be as determined by a third-party appraiser mutually acceptable to AAC and a majority of the noteholders and the terms of such third-party appraisal shall be specified in the definitive documentation governing the Notes.
|
RMBS Litigation Payments:
|
Subject to satisfaction of the Notes, AAC shall pay and/or transfer any Tier 2 Net Proceeds received, in accordance with the terms of the Notes.
For the avoidance of doubt, AAC will not be required to pay, and will not be deemed to have received, any Tier 2 Net Proceeds unless the Tier 2 Net Proceeds are received pursuant to a final and non-appealable judgment, settlement or other arrangement.
|
Non-Cash RMBS Litigation Payments:
|
In the event AAC receives any non-cash Tier 2 Net Proceeds, AAC will, for purposes of making required payments under the Notes, pay a cash amount equal to the fair value of such non-cash Tier 2 Net Proceeds as determined in the manner specified under Total Proceeds, and any such payment of cash shall constitute part of the Tier 2 Net Proceeds payable for the purposes of the satisfaction of AAC’s obligations thereunder.
|
Conditions Precedent:
|
• Satisfaction or waiver of the conditions to effectiveness set forth in the Plan Amendment;
• Execution of final documentation reflecting the terms and conditions set forth herein;
• Payment of reasonable and documented legal fees of the initial purchaser subject to a $400,000 cap; provided, that, any such reasonable and documented fees and expenses in excess of $400,000 shall be payable with the consent of AAC (which shall not be unreasonably withheld).
• Delivery of customary corporate predicate, enforceability, and registration exemption opinions.
|
Event of Default:
|
Failure of AAC to pay amounts due under the Notes within 5 days after the applicable Payment Date.
Breach of any representations, warranties or covenants, subject to customary materiality thresholds and cure periods as reasonably agreed to by AAC and the noteholders.
|
Acceleration:
|
None.
|
Representations and Covenants:
|
Representations, warranties, and covenants substantially equivalent to those relating to the Reference Surplus Notes in that certain Bank Settlement Agreement, dated June 7, 2010, by and among AAC and certain bank counterparties (as amended through the Issue Date) (the “
Precedent Terms”
), subject to necessary modifications to reflect priority and structure, as reasonably agreed to by AAC and the noteholders. Representations shall also include, without duplication, a bring-down of the due authorization, enforceability and no conflicts representations made in the commitment letter to which this Term Sheet is attached.
If any of the Precedent Terms are eliminated, amended, or otherwise modified, either by virtue of a formal amendment, as a result of a redemption or other purchase of Reference Surplus Notes, or otherwise, the holders of Notes shall continue to have the benefit of such provisions regardless of any such occurrence unless holders of a majority of the Notes agree to such change in writing;
provided
, that, if any such amendment or other modification is more favorable to holders of the Reference Surplus Notes, the analogous provisions of the transaction documents in respect of the Notes shall be automatically deemed amended to reflect such more favorable terms.
|
Governing Law:
|
New York
|
Transfer Restrictions:
|
The Notes may be transferred only to persons who are (i) an “institutional accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) of the Securities Act, (ii) a “qualified institutional buyer” within the meaning of Rule 144A of the Securities Act, or (iii) a non-US person within the meaning of Rule 902 of the Securities Act in transactions exempt from registration under the Securities Act. Without the prior written consent of AAC, no holder of Notes may assign, sell, dispose, hypothecate, rehypothecate or otherwise transfer directly or indirectly, synthetically or through any participation, option, put, call or other derivative any Notes or any rights to any Notes to any defendant in any RMBS Litigation or similar litigation or any of their respective subsidiaries or affiliates or any person acting under their direction or influence.
|
Other:
|
Customary provisions regarding consent to jurisdiction, waiver of jury trial, service of process and other miscellaneous matters.
|
Registration:
|
The Notes will not be registered under the Securities Act of 1933, as amended, or any other applicable securities law and, unless so registered, such Notes 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.
|
Tax Characterization:
|
For federal, state and local income tax purposes, AAC, and by accepting the Notes, the holders of the Notes, will agree to treat the Notes as indebtedness of AAC.
|
•
|
the nature of court decisions and opinions in the RMBS Litigations or other litigations involving similar claims or issues;
|
•
|
the settlement of any of the RMBS Litigations;
|
•
|
Ambac’s ability to fund the prosecution of the RMBS Litigations;
|
•
|
Ambac’s creditworthiness, financial condition, performance and prospects;
|
•
|
prevailing interest rates and expectations regarding changes in interest rates;
|
•
|
the market for similar securities; and
|
•
|
economic, financial, geopolitical, regulatory or judicial events that affect Ambac or the financial markets generally.
|
(1)
|
Adjusted Book Value is a Non-GAAP measure. Please refer to the Non-GAAP Financial Measures section of this press release for further information
|
Ambac Financial Group, Inc.
|
||||||||||||||||
Condensed Balance Sheet
|
||||||||||||||||
Reported March 31, 2017 to Pro-Forma Post Restructuring
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
($ in millions)
|
|
(Unaudited)
Reported
March 31, 2017
|
|
Regulatory
Capital
Accretive
Transactions
|
|
Amendment,
Exchanges and
Tier 2
|
|
(Unaudited)
Pro-forma Post
Restructuring
|
||||||||
Assets
|
|
$
|
22,763.6
|
|
|
$
|
(138.9
|
)
|
|
$
|
(2,381.3
|
)
|
|
$
|
20,243.4
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
$
|
20,874.7
|
|
|
$
|
(196
|
)
|
|
$
|
(2,685.3
|
)
|
|
$
|
17,993.4
|
|
|
|
|
|
|
|
|
|
|
||||||||
AFG, Inc. Stockholders' Equity
|
|
$
|
1,624.8
|
|
|
$
|
57.1
|
|
|
$
|
304.0
|
|
|
$
|
1,985.9
|
|
Non-Controlling Interest
|
|
264.1
|
|
|
—
|
|
|
—
|
|
|
264.1
|
|
||||
Total Stockholders' Equity
|
|
$
|
1,888.9
|
|
|
$
|
57.1
|
|
|
$
|
304.0
|
|
|
$
|
2,250.0
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
22,763.6
|
|
|
$
|
(138.9
|
)
|
|
$
|
(2,381.3
|
)
|
|
$
|
20,243.4
|
|
Ambac Financial Group, Inc.
|
||||||||||||||||
Adjusted Book Value
|
||||||||||||||||
|
|
|
|
|
|
|
||||||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
|
|
Reported
|
|
Pro-Forma
|
||||||||||||
|
|
March 31, 2017
|
|
Post Restructuring
|
||||||||||||
$ in millions (other than per share data)
|
|
$ Amount
|
|
Per Diluted Share
|
|
$ Amount
|
|
Per Diluted Share
|
||||||||
Total Ambac Financial Group, Inc. stockholders’ equity (Book Value)
|
|
$
|
1,624.8
|
|
|
$
|
35.92
|
|
|
$
|
1,985.9
|
|
|
$
|
43.90
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value losses on credit derivatives
|
|
13.2
|
|
|
0.29
|
|
|
13.2
|
|
|
0.29
|
|
||||
Insurance intangible asset
|
|
(931.2
|
)
|
|
(20.58
|
)
|
|
(924.2
|
)
|
|
(20.45
|
)
|
||||
Ambac CVA on interest derivative liabilities
|
|
(42.9
|
)
|
|
(0.95
|
)
|
|
—
|
|
|
—
|
|
||||
Net unearned premiums and fees in excess of expected losses
|
|
701.4
|
|
|
15.51
|
|
|
699.2
|
|
|
15.47
|
|
||||
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income
|
|
(140.2
|
)
|
|
(3.10
|
)
|
|
(105.5
|
)
|
|
(2.33
|
)
|
||||
Adjusted Book Value
|
|
$
|
1,225.1
|
|
|
$
|
27.09
|
|
|
$
|
1,686.6
|
|
|
$
|
36.90
|
|
Shares outstanding (in millions)
|
|
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45.2
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45.2
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