SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934 (Amendment No. __)

 

 

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[x] Soliciting Material Under Rule 14a-12

 

Ambac Financial Group, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

Canyon Capital Advisors LLC
The Canyon Value Realization Master Fund, L.P.

Mitchell R. Julis

Joshua S. Friedman

Frederick Arnold

John Brecker

Eugene Davis

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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On March 9, 2016, Canyon Capital Advisors LLC (“Canyon”) issued a press release, which included a link to a presentation to stockholders of Ambac Financial Group, Inc. (“Ambac”). Copies of the press release and the presentation are filed herewith as Exhibit 1 and Exhibit 2, respectively.

Information regarding the participants in a proxy solicitation with respect to Ambac is filed herewith as Exhibit 3.

EXHIBIT 1 

 

Canyon Capital Nominates Three Highly-Qualified Independent Candidates for Election to Ambac’s Board of Directors

 

New Independent Directors are Critical to Creating Stockholder Value and

Remedying Poor Company Performance and Accountability

 

LOS ANGELES, March 14, 2016 - Canyon Capital Advisors LLC (“Canyon Capital”), a leading alternative asset manager serving institutional clients worldwide, and manager of funds and accounts that own almost 5% of the outstanding shares of Ambac Financial Group, Inc. (Nasdaq:AMBC) ("Ambac" or the “Company”), today announced its nomination of three highly-qualified independent candidates for election to Ambac’s Board of Directors. Ambac stockholders will have the opportunity to vote on these nominees at the Company’s 2016 Annual Meeting of Stockholders, which is scheduled to be held on May 12, 2016.

Canyon Capital has released the following presentation that provides additional information and specific details on Canyon Capital’s concerns with Ambac’s Board and Mr. Tavakoli: http://origin-qps.onstreammedia.com/origin/multivu_archive/ENR/343606-ambac-presentation.pdf

The Need for Fresh Leadership

Canyon Capital repeatedly has voiced significant concerns with the Company’s underperformance and lack of strategic direction under existing management. Rather than proactively address those concerns, however, the incumbent Board has remained steadfast in its commitment to maintaining the status quo. Thus, notwithstanding the 42% decline in Ambac’s stock price under his interim leadership in 2015, the Board decided to appoint Nader Tavakoli as the Company’s permanent President and CEO and provided him with exorbitant compensation packages that could total over $40 million through 2018 if Ambac’s stock price merely returns to where it started under his tenure.

Mr. Tavakoli’s lack of relevant experience, lack of a defined vision and strategic plan for the business, and substandard performance is undoubtedly harming Ambac. Although Ambac touts $25 of operating earnings per share in 2015, Ambac’s stock price plummeted by 42% (to $14 per share). Rather than being reflective of Company performance, Canyon believes the $25 of operating earnings were in fact due primarily to changes in future loss assumptions related to mortgage securities, litigation estimates and the early refinancing of municipal bonds.

In an attempt to distract stockholders from the fundamental issues plaguing the Company’s performance, and its diminishing equity value, Ambac’s incumbent Board and management have portrayed Canyon Capital as conflicted because it also is a policyholder. However, Canyon Capital is one of the Company’s largest stockholders and the interests of policyholders and stockholders are aligned. The Company’s policy claims are accruing substantial interest and must be paid down before stockholders

 
 

receive any return of capital. Ambac presently has significant excess capital with which to do so. Indeed, Ambac’s stock price has consistently performed better in years when the Company deployed capital to pay down claims.

As the Company’s actions show, the real conflict that exists is between stockholders and management. The majority of Ambac’s municipal bond policies will be in a position to be run-off by the end of 2017. Management and the Board have a clear conflict in that as policies continue to run-off, so does their time at the helm. Neither management nor the Board has been forthright in explaining the Company’s excess capital position or its plans for deploying the same. Instead, management has made preposterous proposals for other ways to deploy stockholder capital, including a home repair business and an asset management business. Such plans are a waste, do not provide for return of capital to Ambac stockholders, and entrench and enrich management.

For example, Mr. Tavakoli stated:

·“This October we introduced a pilot program to invest in residential real estate owned properties within Ambac insured transactions. The main component of the value creation of this project will be the result of making repairs to the REO properties in order to bring them up to neighborhood standards.” See Ambac 3Q15 Earnings Call Tr.
·“We’re giving substantial thought to deploying our capital strategically in asset management businesses.” See Ambac 4Q15 Earnings Call Tr.

Ambac also has touted its purported reduction in expenses. Unlike its peer companies, however, Ambac’s expenses have actually increased under Mr. Tavakoli’s tenure. That is so despite the continued run-off of Ambac’s legacy exposures and Mr. Tavakoli having publicly projected expense reductions that would begin to take hold last year.

Canyon Capital believes these issues should be of the utmost concern to all Ambac stockholders and believes the Company’s performance will continue to suffer without significant changes in the boardroom.

Canyon Capital’s nominees are:

·Frederick Arnold – Chief Financial Officer of ConvergEx Group, with decades of executive leadership experience at major global financial services and manufacturing firms, as well as extensive directorship experience.
·John Brecker – Director of ACA Financial Guaranty Corporation, The PMI Group, Inc., Broadview Networks, Inc. and Catalyst Paper Corporation, with significant insurance industry and directorship experience.
 
 
·Eugene Davis – Founder, Chairman and Chief Executive Officer of PIRINATE Consulting Group, LLC, with extensive corporate restructuring and directorship experience.

Canyon Capital’s nominees possess the skills and experience needed to work proactively with the Company’s other independent directors to reverse Ambac’s lagging performance, increase transparency and accountability, and ensure that Ambac’s business is strategically positioned for future success.

Additional Information About the Nominees

Frederick Arnold

Mr. Arnold is an accomplished leader in financial services companies and brings over 30 years of industry experience. He has strong expertise navigating highly complex and troubled situations which typically entail change, operational improvements and enhancements to corporate governance. His accomplishments include:

·Member of the post-emergence board of directors of Lehman Brothers Holdings Inc. Since Lehman’s emergence from bankruptcy, the board has been engaged in the restructuring and liquidation of the largest ever bankruptcy estate – an enterprise far larger and more complex than Ambac. The board of Lehman Brothers Holdings Inc. has been intimately involved in liquidating and resolving hundreds of billions of assets and claims, negotiating and settling complex legacy exposures, and pursuing and settling litigation including mortgage representations & warranties.
·Currently Chief Financial Officer and a member of the Executive Committee of ConvergEx Group, LLC, an agency-focused global brokerage and trading-related services provider, which he joined in 2015.

John Brecker

Mr. Brecker has extensive experience serving on compensation, audit and governance committees of various boards of directors of public and private companies. He is also an expert in directing and managing hedge funds, with a specialization in distressed debt and equities. His accomplishments include:

·Partner of Drivetrain Advisors, LLC, a company addressing the needs for investment-focused distressed business expertise. Mr. Brecker has specific experience in distressed insurance businesses, as relates to rehabilitation, restructuring, litigation and wind down of legacy exposures.
·Board member of ACA Financial Guaranty Corporation ACA successfully reached a restructuring plan, settling significant legacy insurance exposures, while
 
 

protecting municipal policyholders. Today, ACA continues to wind down its legacy portfolio of exposures. Board and management have worked closely with the Maryland insurance regulators.

·Board member of The PMI Group, Inc., a mortgage insurance company, which underwent Chapter 11 proceedings, while certain subsidiaries were placed in regulatory receivership. PMI successfully emerged from bankruptcy in 2013.
·Previously, Principal and Co-Founder of Longacre Fund Management, LLC, an investment manager, from 1998 to 2012, during which time he also served as Principal and Co-Founder of Longacre Special Equities Fund Management, LLC, an investment manager.

Eugene Davis

Mr. Davis is a well-respected and highly regarded C-suite and boardroom executive. He has significant expertise leading successful company turnarounds and extensive experience serving as a director on multiple public companies. His accomplishments include:

·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. Mr. Davis executed a highly successful monetization of legacy assets substantially above balance sheet values. He worked directly with banking regulators on reorganizing, monetizing, and ultimately dissolving Capmark Bank, a Utah-chartered FDIC-insured banking institution. This led to the return of over $2.5 billion of cash to common stockholders via dividend distributions. He also received stockholder support to use the remaining approximately $400 million of estate assets and existing balance sheet attributes as an acquisition platform.
·Board member and Chairman of CIFG Guaranty. CIFG is a monoline insurer. The board and management successfully reduced legacy exposures by over 90% by pursuing commutations, paying down policies and liability management and litigation. Mr. Davis helped to significantly improve the net capital position of the business, to the point where the company has begun returning capital to stockholders. The company has also substantially reduced operating expenses over the course of the liquidation.
·Director of WMI Holdings Corp., a successor to Washington Mutual Inc. Served as the former Chair of the Corporate Strategy and Development Committee, Chairman of Nominating and Governance Committee, and a member of the Compensation Committee.
 
 

About Canyon Capital Advisors LLC

Canyon Capital Advisors LLC is a leading alternative asset manager serving institutional clients worldwide. The firm seeks to achieve superior, risk-adjusted returns in excess of the debt and equity market indices with lower volatility. Canyon Capital and its affiliates currently manage investment funds and separate accounts amounting to over $20 billion in assets with a staff of over 200, including more than 100 investment professionals. The firm was founded in 1990 and is headquartered in Los Angeles, with offices in London, New York, Shanghai and Tokyo. Canyon Capital has been an SEC registered investment advisor since 1994.

Media Contact

Mike Geller / Nadia Damouni

Edelman

212-729-2163 / 917-344-4771

Mike.Geller@edelman.com / Nadia.damouni@edelman.com

 

CANYON CAPITAL ADVISORS LLC, THE CANYON VALUE REALIZATION MASTER FUND, L.P., MITCHELL R. JULIS AND JOSHUA S. FRIEDMAN (COLLECTIVELY, "CANYON"), FREDERICK ARNOLD, JOHN BRECKER, AND EUGENE DAVIS (COLLECTIVELY WITH CANYON, THE “PARTICIPANTS”) INTEND TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") A DEFINITIVE PROXY STATEMENT AND ACCOMPANYING FORM OF PROXY CARD TO BE USED IN CONNECTION WITH THE PARTICIPANTS' POTENTIAL SOLICITATION OF PROXIES FROM THE STOCKHOLDERS OF AMBAC FINANCIAL GROUP, INC. (THE "COMPANY") FOR USE AT THE COMPANY'S 2016 ANNUAL MEETING OF STOCKHOLDERS (THE "PROXY SOLICITATION"). ALL STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO THE PROXY SOLICITATION, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL INFORMATION RELATED TO THE PARTICIPANTS. WHEN COMPLETED, THE DEFINITIVE PROXY STATEMENT AND AN ACCOMPANYING PROXY CARD WILL BE FURNISHED TO SOME OR ALL OF THE COMPANY'S STOCKHOLDERS AND WILL BE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO CHARGE ON THE SEC'S WEBSITE AT HTTP://WWW.SEC.GOV/.

INFORMATION ABOUT THE PARTICIPANTS AND A DESCRIPTION OF THEIR DIRECT OR INDIRECT INTERESTS BY SECURITY HOLDINGS WILL BE

 
 

CONTAINED IN AN EXHIBIT TO THE SCHEDULE 14A TO BE FILED BY CANYON WITH THE SEC ON MARCH 14, 2016. THIS DOCUMENT CAN BE OBTAINED FREE OF CHARGE FROM THE SOURCE INDICATED ABOVE.

March 14, 2016 © Canyon Capital Advisors LLC

 
 

Overview of Canyon Canyon Capital Advisors LLC ("Canyon") was founded in 1990 by Joshua S.FriedmanandMitchellR.Julis,bothofwhomhavebeenintimatelyinvolvedin thestressed/distressedmarketssincetheearly1980’s. ▪ Canyonhasover200investmentprofessionalsandofficesinLosAngeles,NewYork, London,ShanghaiandTokyo. Canyon invests across the corporate capital structure, primarily in US and Europeancompanies,oftenleveragingourexperiencetoprovidefinancingto entitiesthatmaynothaveaccesstotraditionalcapital. Canyonhassignificantexpertiseinstructuredfinancespace,includingRMBS, CDO/CLO,municipals,aircraftsecuritizationandotherniches,includingalltypesof wrappedsecurities. Substantial experience with distressed financials, including liquidations and recapitalizations. Canyon is a global alternative asset manager with over $20 billion in AUM Page 2 © Canyon Capital Advisors LLC

 
 

Current management oversaw a 42% stock decline in 2015, underperforming peers. We believe this decline will continue without changeintheboardroom. Despitepoorperformance,theBoardawardedtheCEOanegregiouspay packagethatcanballoontoover$40mmthrough2018,evenifheonly restoresAmbac’sstockpricetothelevelitwaswhenhebecameinterim CEO. Webelieveourslateofdirectorswillpursueastrategythatwillmaximize returnofcapitaltostockholdersasquicklyaspossible. ▪ Odeon Capital Group,a sell side researchfirm coveringAmbac, values Ambac’sadjustedbookvalueat$45pershareintheirbasecase. ▪ Webelieveournomineeswillworkexpeditiouslytoreturnthemaximum amount of capital available to stockholders, consistent with their independent judgment and exercise of their fiduciary duties to the Company'sstockholders. ▪ Ournomineeshaveatrackrecordofsuccessandareeagertoleveragetheir industryexperiencetocorrecttheCompany'scourse. Why AmbacNeeds a New Board Page 3 © Canyon Capital Advisors LLC

 
 

The Company’s Poor Performance TheCompanytouts$25ofoperatingearningspersharein2015. Themarketknowsbetter:Ambacsharesdeclinedfrom$24.50to $14.09(42%)duringthesameperiod. WebelievetheCompany'searningswereprimarilyduetochangesin futurelossassumptionsrelatedtomortgagesecurities,litigation estimatesandtheearlyrefinancingofmunicipalbonds. Ambacstillholdsover$26pershareofanInsuranceIntangibleAsset (relatedtofinancialguarantees)thatstillneedstobewrittenoff, causingadragonearningsfortheforeseeablefuture. Webelievemanagement’sexcessspendingiscostingstockholders almost$1pershareannually. 1 Unlike Assured Guaranty and MBIA, Ambac is not paying any dividendstostockholdersorrepurchasingstock. Page 4 © Canyon Capital Advisors LLC 1 Based on a comparison to MBIA'soperating expenses / net debt service outstanding ratio, pro forma for approximately $9mm in additional expenses for Mr. Tavaokli'smaximum compensation for 2016.

 
 

Management Compensation Despite the dismal stock performance, the Board awarded Mr. Tavakoli an additional cash bonus for 2015. Inexplicably, the Board awarded Mr. Tavakolipackages which could balloon to over $40mm through 2018, even if he only restores Ambac’s stock price to the level it was when he became interim CEO, creating no net stockholder value. For the year 2016, Mr. Tavakoli’starget and max compensation would equal 11% and 18% of Ambac’s total compensation expense, respectively. Mr. Tavakoli’starget pay is 3.4x that of his predecessor, whose compensation he helped determine. Unlike his predecessor, Mr. Tavakoliis not prohibited from working part time. Ambacannounced that the compensation was within market norms, but provides no factual basis; Mr. Tavakoli'sunsubstantiated claims are a consistent pattern. Page 5 © Canyon Capital Advisors LLC

 
 

Policyholder Claims and Purported Conflicts Inan attempttodistractstockholdersfromtherealissues,Ambac's managementclaimsCanyonisconflictedasapolicyholder. ButCanyonownsalmost5%ofAmbac'sstock;itspolicyinterests onlyaddtoitslargestakeintheCompany. Ambac’saccusationimpliesthataninvestorwithagreaterstakeina companysomehowhaslessinterestinitspropermanagement:that makesnosense. Infact,policyclaimsarealignedwithequity. Policyclaimsareaccruingsubstantialinterestandarerequiredtobe paiddownbeforeequitygetsanyreturnofcapital. Based on expected future losses and recoveries, the regulator overseeing the rehabilitation under the Wisconsin Insurers RehabilitationandLiquidationActconcludedclaimswillbepaidat parplusaccruedinterest. Page 6 © Canyon Capital Advisors LLC

 
 

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. By not paying off Ambac’s $3.5bn of claims, $2 per share of value is permanently lost every year. 2 Stockholders lose if Ambac does not pay down its claims and exit Rehabilitation. Page 7 © Canyon Capital Advisors LLC 1 3Q2015 Operating Supplement p. 13, table titled “Income Analysis by Type of Security”. Excludes the notional yield on Ambac'sown policies, and includes short-term investments. 2 Calculated (on a per share basis) as (x) thedifference in interest accrued on policy claims (5.1%) and the investment portfolio return (2.78%) multiplied by (y) $3.5 billion in claims. Canyon believes that the investment portfolio return would be even lower if cash were included, and may be still lower going forward this year due to the recent buildup of cash.

 
 

Ambac stockholders profited when claims were paid down and lost money in 2015 when they were not. Paying Off Claims is Good for Stockholders Page 8 © Canyon Capital Advisors LLC 1 from May 2013 initial listing through year end Source: Ambac10-Ks. Period Policy Claims Paid Down Stock Performance 2012 –2013 (initial 25% paydown) $1.1 billion +22% 1 2014 (27% paydown) $1.6 billion 0% 2015 (no paydown) $0 billion -42%

 
 

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 refinancableby the end of 2017. Management and the Board have a clear conflict in that as policies continue to run-off, so does their time at the helm. They have suggested distracting new business lines that will only further enrich and entrench managementand continue to harm stockholders. Instead of proposing amorphous plans to deploy capital, management should focus on liquidating and returning capital. ▪ Deferring distributions of capital only enriches and insulates management and the Board by unnecessarily prolonging their tenures. We believe that management should return the maximum amount of capital available to stockholders. Page 9 © Canyon Capital Advisors LLC

 
 

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 believes there is currently approximately $2bn of excess capital available to pay down claims. MBIA AGO Ambac Claims Paying Resources (“CPR”) $7.1bn $12.3bn $9.1bn Net Debt Service Outstanding (“NDSO”) $317bn $502bn $171bn NDSO / CPR ratio 45x 41x 19x Ambac'sCPR if it had same NDSO/ CPR ratio as MBIAand AGO, respectively $3.8bn $4.2bn Ambac'sExcess Claims Paying Resources (based on MBIAand AGO'sNDSO/ CPR ratios) $5.2bn $4.9bn Page 10 © Canyon Capital Advisors LLC Source: MBIA, AGO and Ambac10-Q filings.

 
 

© Canyon Capital Advisors LLC Page 11 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 Company's current buyback rate is clearly insufficient. ▪ The above buybacks included only approximately $500mm of policy claims. Management’s claim above suggests this is a viable process for sufficiently reducing claims. Unfortunately, the opportunity to buy back more claims in the market is limited for multiple reasons. ▪ Regulatory approval requirements. ▪ Level of market liquidity. Excess Capital at Ambac

 
 

Ambac’sLack of Strategic Vision Instead of returning capital to stockholders, Mr. Tavakolihas announced a variety of amorphous plans to invest in: ▪ Home Repair Business –Leveraging AmbacResources ? “We also initiated a new program we recently introduced which highlights leverage of our existing resources. This October we introduced a pilot program to invest in residential real estate owned propertieswithin Ambac insured transactions. The main component of the value creation of this project will be the result of making repairs to the REO properties in order to bring them up to neighborhood standards. Upon completion of necessary repairs, the properties will either be immediately resold or resold at a future date after being rented for a period of time. . . This program will be rolled out gradually in order to validate our internal investment thesis.” –Mr. Tavakoli, 3Q15 Earnings Call ▪ Asset Management Business Acquisition ? “[W]e'regiving substantial thought to deploying our capital strategically in asset management businesses”–Mr. Tavakoli, 4Q15 Earnings Call The Board should not entertain any of these preposterousideas without consulting major stockholders. Page 12 © Canyon Capital Advisors LLC

 
 

Increasing Expenses under Mr. Tavakoli In 2015, as Ambac’s exposures continued to run-off primarily due to municipal refinancings, the Company’s expensesactually grew. ▪ MBIA, which had a comparable exposure runoff, cut expenses by 28%. This does not take into account Mr. Tavakoli’sgrowing compensation, which could be 10%+ of the entire compensation budget and cause 2016 expenses to increase further. Monoline 2015 Change in Exposure Reduction 2015 Change in Operating Expenses MBIA 26% Lower 28% Lower Ambac 25% Lower 1% HIGHER! Page 13 © Canyon Capital Advisors LLC Source: Ambac4Q2015 Operating Supplement; MBIA 4Q2015 Operating Supplement

 
 

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 are anticipated from staffing actions. We expect the majority of these expense savings to begin to be realized in the 4th quarter.” (2Q15) BUTtotal Q4 operating expenses actually increased and total 2015 operating expenses increased1% versus 2014. $282.2 $272.9 $263.6 $247.8 $228.9 $214.8 $204.5 $187.8 $171.0 $27.5 $25.8 $24.0 $25.5 $26.1 $24.5 $25.9 $25.0 $27.3 $10.0 $14.0 $18.0 $22.0 $26.0 $30.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 $450.0 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 O p e r a t i n g E x p e n s e s N e t D e b t S e r v i c e O u t s t a n d i n g NDSO Opex Page 14 © Canyon Capital Advisors LLC Source: AmbacOperating Supplements.

 
 

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 stockholdersand maximizing enterprise value of financial companies, as detailed in the following biographies. Page 15 © Canyon Capital Advisors LLC

 
 

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 board of directors of Lehman Brothers Holdings Inc.Since Lehman’s emergence from bankruptcy, the board has been engaged in the restructuring and liquidation of the largest ever bankruptcy estate –an enterprise far larger and more complex than Ambac. Among other activities, the board of Lehman Brothers Holdings Inc. has been intimately involved in liquidating and resolving hundreds of billions of assets and claims, negotiating and settling complex legacy exposures, pursuing and settling litigation including mortgage representations & warranties. Currently Chief Financial Officer and a member of the Executive Committee of ConvergExGroup, LLC, an agency-focused global brokerage and trading related services provider, which he joined in 2015. Page 16 © Canyon Capital Advisors LLC

 
 

John Brecker–Relevant Experience Partner of Drivetrain Advisors, LLC, acompany 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 exposures. Board member of ACAFinancial Guaranty Corporation.ACAsuccessfully reached a restructuring plan, settling significant legacy insurance exposures, while protecting municipal policyholders. Today ACAcontinues to wind down the legacy portfolio of exposures. During his tenure, the board and management worked closely with the Maryland insurance regulators. Board member of The PMI Group, Inc., amortgage insurance company, which underwent Chapter 11 proceedings, while certain of its subsidiaries were placed in regulatory receivership. PMI successfully emerged from bankruptcy in 2013. Previously, Principal and Co-Founder of LongacreFund Management, LLC, an investment manager, from 1998 to 2012, during which time (from 2005 to 2012) he also served as Principal and Co-Founder of LongacreSpecial Equities Fund Management, LLC, an investment manager. Page 17 © Canyon Capital Advisors LLC

 
 

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 CapmarkFinancial Group. Executed a highly successful monetization of legacy assets substantially above balance sheet values. Worked directly with banking regulators on reorganizing, monetizing, and ultimately dissolving CapmarkBank, a Utah-chartered FDIC-insured banking institution. Returned over $2.5 billion of cash to common stockholders via dividend distributions. Received stockholder support to use the remaining ~$400 million of estate assets and existing balance sheet attributes as an acquisition platform. Board member and Chairman of CIFG Guaranty. CIFG is a monolineinsurer. The board and management successfully reduced legacy exposures by over 90% by pursuing commutations, paying down policies, liability management and litigation. Under his leadership, CIFGsignificantly improved the net capital position of the business, to the point where the company has begun returning capital to stockholders. CIFGsubstantially reduced operating expenses over the course of the liquidation. Director of WMI Holdings Corp., a successor to Washington Mutual Inc. Former Chair of the Corporate Strategy and Development Committee, Chairman of Nominating and Governance Committee, and a member of the Compensation Committee. Page 18 © Canyon Capital Advisors LLC

 
 

CANYON CAPITAL ADVISORS LLC, THE CANYON VALUE REALIZATION MASTER FUND, L.P., MITCHELL R. JULISAND JOSHUA S. FRIEDMAN (COLLECTIVELY, "CANYON"), FREDERICK ARNOLD, EUGENE DAVIS AND JOHN BRECKER (COLLECTIVELY WITH CANYON, THE “PARTICIPANTS”) INTEND TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") A DEFINITIVE PROXY STATEMENT AND ACCOMPANYING FORM OF PROXY CARD TO BE USED IN CONNECTION WITH THE PARTICIPANTS' SOLICITATION OF PROXIES FROM THE STOCKHOLDERS OF AMBACFINANCIAL GROUP, INC. (THE "COMPANY") FOR USE AT THE COMPANY'S 2016 ANNUAL MEETING OF STOCKHOLDERS (THE "PROXY SOLICITATION"). ALL STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO THE PROXY SOLICITATION, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL INFORMATION RELATED TO THE PARTICIPANTS. WHEN COMPLETED, THE DEFINITIVE PROXY STATEMENT AND AN ACCOMPANYING PROXY CARD WILL BE FURNISHED TO SOME OR ALL OF THE COMPANY'S STOCKHOLDERS AND WILL BE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO CHARGE ON THE SEC'SWEBSITE AT HTTP://WWW.SEC.GOV/. INFORMATION ABOUT THE PARTICIPANTS AND A DESCRIPTION OF THEIR DIRECT OR INDIRECT INTERESTS BY SECURITY HOLDINGS WILL BE CONTAINED IN AN EXHIBIT TO THE SCHEDULE 14A TO BE FILED BY CANYON WITH THE SEC ON MARCH 14,2016. THIS DOCUMENT CAN BE OBTAINED FREE OF CHARGE FROM THE SOURCE INDICATED ABOVE. Any assumptions, assessments, estimates, projections or the like (collectively, “Statements”) regarding future events or which are forward-looking in nature constitute only subjective views, outlooks or estimations, are based upon Canyon's current expectations or beliefs, are subject to change due to a variety of factors, including fluctuating market conditions and economic factors, and involve inherent risks and uncertainties, many of which cannot be predicted or quantified and are beyond Canyon's control. Actual results could differ materially from those set forth in, contemplated by, or underlying these Statements. In light of these risks and uncertainties, there can be no assurance and no representation or warranty is given that these Statements are now or will prove to be accurate or complete in any way in the future. Canyon has neither sought nor obtained the consent from any third party to use any statements or information contained herein that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein. Important Information Page 19 © Canyon Capital Advisors LLC

 

EXHIBIT 3

PARTICIPANTS:

 

The following individuals are participants in a solicitation of proxies from the stockholders of Ambac Financial Group, Inc. (the “Company”) in connection with the Company’s 2016 annual meeting of stockholders: (i) Canyon Capital Advisors LLC (“Canyon”); (ii) The Canyon Value Realization Master Fund, L.P. (“CVRMF”); (iii) Mitchell R. Julis; (iv) Joshua S. Friedman; (v) Frederick Arnold; (vi) John Brecker; and (vii) Eugene Davis.

 

BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK:

 

As of the close of business on March 11, 2016, Canyon beneficially owned (as used in this Exhibit 2, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended), in the aggregate, 2,219,290 shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”), as follows: (a) 786,771 shares of Common Stock are held through CVRMF, including 1,000 shares of Common Stock held in record name; (b) 2,219,290 shares of Common Stock may be deemed to be beneficially owned by Canyon, by virtue of its direct and indirect control of funds and accounts managed by it, including the 786,771 shares of Common Stock held through CVRMF (including 1,000 shares of Common Stock held by CVRMF in record name); and (c) 2,219,290 shares of Common Stock may be deemed to be beneficially owned by each of Messrs. Julis and Friedman by virtue of their shared control of Canyon.

 

BENEFICIAL OWNERSHIP OF SURPLUS NOTES:

 

As of the close of business on March 11, 2016, Canyon beneficially owned, in the aggregate, $259,254,881.00 in aggregate amount outstanding of 5.1% surplus notes due June 7, 2020 issued by Ambac Assurance Corporation (“Surplus Notes”), as follows: (a) $106,177,239.00 in aggregate amount outstanding of Surplus Notes are held through CVRMF; (b) $259,254,881.00 in aggregate amount outstanding of Surplus Notes may be deemed to be beneficially owned by Canyon, by virtue of its direct and indirect control of funds and accounts managed by it, including the $106,177,239.00 in aggregate amount outstanding of Surplus Notes held through CVRMF; and (c) $259,254,881.00 in aggregate amount outstanding of Surplus Notes may be deemed to be beneficially owned by each of Messrs. Julis and Friedman by virtue of their shared control of Canyon.

 
 

 

BENEFICIAL OWNERSHIP OF RMBS:

 

The following table sets forth, as of the close of business on March 11, 2016, the original face amount of Company-insured residential mortgage backed securities (“RMBS”) beneficially owned by the Participants:

 

CUSIP

Original Face Amount ($) Beneficially Owned

By Canyon, Mr. Julis and Mr. Friedman

Original Face Amount ($) Held Through CVRMF
07401WAA7 20,166,430 1,800,000
07401WBA6 80,107,518 13,691,755
126685CS3 104,452,000 25,024,000
126685DJ2 59,930,000 0
12666TAB2 7,953,000 5,278,000
12666TAD8 20,596,000 0
126685CZ7 23,180,000 0
41161PTM5 31,000,000 0
41161XAP1 12,500,000 8,330,000
45257VAD8 7,400,000 0
525221EQ6 54,122,500 0
52524VAT6 15,000,000 0
75115GAC2 22,726,911 15,363,819
785813AA4 19,801,456 0