Slide 1: March 14, 2016
March 14, 2016 © Canyon Capital Advisors LLC
Slide 2: Overview of Canyon
Overview of Canyon Canyon Capital Advisors LLC ("Canyon") was founded in 1990 by Joshua S. Friedman and Mitchell R. Julis, both of whom have been intimately involved in the stressed/distressed markets since the early 1980’s. Canyon has over 200 investment professionals and offices in Los Angeles
Slide 3: Why Ambac Needs a New Board
Why Ambac Needs a New Board Current management oversaw a 42% stock decline in 2015, underperforming peers. We believe this decline will continue without change in the boardroom. Despite poor performance, the Board awarded the CEO an egregious pay package that can balloon to over $40mm through 20
Slide 4: The Company's Poor Performance
The Company’s Poor Performance The Company touts $25 of operating earnings per share in 2015. The market knows better: Ambac shares declined from $24.50 to $14.09 (42%) during the same period. We believe the Company's earnings were primarily due to changes in future loss assumptions related to
Slide 5: Management Compensation
Management Compensation Despite the dismal stock performance, the Board awarded Mr. Tavakoli an additional cash bonus for 2015. Inexplicably, the Board awarded Mr. Tavakoli packages which could balloon to over $40mm through 2018, even if he only restores Ambac’s stock price to the level it was w
Slide 6: Policyholder Claims and Purported Conflicts
Policyholder Claims and Purported Conflicts In an attempt to distract stockholders from the real issues, Ambac's management claims Canyon is conflicted as a policyholder. But Canyon owns almost 5% of Ambac's stock; its policy interests only add to its large stake in the Company. Ambac’s accusa
Slide 7: Policyholder Claims and Purported Conflicts
Policyholder Claims and Purported Conflicts But meanwhile, policy claims are accruing interest at 5.1%. Properly calculated, Ambac’s investment portfolio returned only 2.78% in Q3, substantially below the level of interest accruing on its claims.1 Returns would be lower if cash were included.
Slide 8: Paying Off Claims is Good for Stockholders
Paying Off Claims is Good for Stockholders Ambac stockholders profited when claims were paid down and lost money in 2015 when they were not. Period Policy Claims Paid Stock Performance Down 2012 – 2013 $1.1 billion +22%1 (initial 25% paydown) 2014 $1.6 billion 0% (27% paydown) 2015 $0 billion -42%
Slide 9: The Real Conflict is Between Stockholders & Entrenched Management
The Real Conflict is Between Stockholders & Entrenched Management Ambac hasn’t written any material new business since 2008 and the majority of the legacy municipal bond exposure will be callable and refinancable by the end of 2017. Management and the Board have a clear conflict in that as polic
Slide 10: Excess Capital at Ambac
Excess Capital at Ambac Per the comparison below, Ambac is holding approximately $5bn of excess Claims Paying Resources compared to its larger peers. With less relative capital, both MBIA and AGO are returning substantial capital to their stockholders. Due to liquidity and asset mix, Canyon be
Slide 11: Excess Capital at Ambac
Excess Capital at Ambac Management has touted its $635mm of insured securities buybacks in 2015, but its actions have been reactive and subscale. Canyon prodded management for years to take these steps. With what we believe is at least $2bn of excess capital available to the Company, the Compa
Slide 12: Ambac's Lack of Strategic Vision
Ambac’s Lack of Strategic Vision Instead of returning capital to stockholders, Mr. Tavakoli has announced a variety of amorphous plans to invest in: Home Repair Business – Leveraging Ambac Resources ▪ “We also initiated a new program we recently introduced which highlights leverage of our existi
Slide 13: Increasing Expenses under Mr. Tavakoli
Increasing Expenses under Mr. Tavakoli In 2015, as Ambac’s exposures continued to run‐off primarily due to municipal refinancings, the Company’s expenses actually grew. MBIA, which had a comparable exposure runoff, cut expenses by 28%. This does not take into account Mr. Tavakoli’s growing com
Slide 14: Yet the CEO Publicly Promotes His Cost Cutting
Yet the CEO Publicly Promotes His Cost Cutting Although Mr. Tavakoli touts his cost‐cutting, the reality is the opposite. The Company claims: It “started to implement the business line restructuring, which includes a head count reduction at the firm.” (2Q15) “Annual savings of about $5 million
Slide 15: Stockholders Deserve Better
Stockholders Deserve Better Stockholders deserve a Board that will be honest about earnings and value creation and not reward the performance problems highlighted above. Canyon’s Board nominees each have a track record of returning capital to stockholders and maximizing enterprise value of finan
Slide 16: Fred Arnold – Relevant Experience
Fred Arnold – Relevant Experience Accomplished leader of financial services companies with over 30 years of experience. Particular expertise in highly complex and troubled situations typically entailing change, operational improvement and governance enhancement. Member of the post‐emergence boar
Slide 17: John Brecker – Relevant Experience
John Brecker – Relevant Experience Partner of Drivetrain Advisors, LLC, a company addressing the needs for investment‐focused distressed business expertise. Specific experience in distressed insurance businesses, as relates to rehabilitation, restructuring, litigation and wind‐down of legacy expos
Slide 18: Eugene Davis – Relevant Experience
Eugene Davis – Relevant Experience Chairman and Chief Executive Officer of PIRINATE Consulting Group, LLC, a privately‐held consulting firm specializing in turn‐around management, which he founded in 1999. Executive Chairman of Capmark Financial Group. Executed a highly successful monetization o
Slide 19: Important Information
Important Information CANYON CAPITAL ADVISORS LLC, THE CANYON VALUE REALIZATION MASTER FUND, L.P., MITCHELL R. JULIS AND JOSHUA S. FRIEDMAN (COLLECTIVELY, "CANYON"), FREDERICK ARNOLD, EUGENE DAVIS AND JOHN BRECKER (COLLECTIVELY WITH CANYON, THE “PARTICIPANTS”) INTEND TO FILE WITH THE SECURITIES AND