AMBAC FINANCIAL GROUP, INC. Item 1.01. Entry into a Material Definitive Agreement. Purchase Agreement OnJanuary 19, 2021 ,Ambac Assurance Corporation ("AAC"), a wholly-owned subsidiary ofAmbac Financial Group, Inc. ("AFG" and, together with AAC, the "Company") entered into a purchase agreement (the "Agreement") with AFG and certain funds or accounts affiliated with or managed byCVC Credit Partners, LLC ,CVC Credit Partners Investment Management Limited andEJF Capital LLC (the "Note Holders"), pursuant to which, subject to the conditions precedent set forth in the Agreement and described herein, (i) the Note Holders have agreed to sell to AAC all of the individual beneficial or book-entry interests (the "Interests") in the 5.1% senior notes dueAugust 28, 2039 (the "Notes"), issued by theCorolla Trust , aDelaware statutory trust formed by AFG in 2014, (ii) AFG has agreed to sell to AAC the owner trust certificate for theCorolla Trust (the "Certificate"), which constitutes all of the equity interests in theCorolla Trust , and (iii) AAC has agreed to exchange the Interests and the Certificate for AAC's 5.1% Senior Surplus Notes due 2020 (the "Senior Surplus Notes") (collectively, the Transaction"). The Note Holders hold 100% of the outstanding Notes. Pursuant to the Agreement, each$1.00 principal amount of the Notes (and the associated amount of accrued and unpaid interest thereon) was exchanged for$0.9125 principal amount of Senior Surplus Notes (in factored par value, and the associated amount of accrued and unpaid interest thereon) on the date of the consummation of the Transaction (the "Closing"). In addition, every$1.00 principal amount of the Certificate (and the associated amount of accrued and unpaid interest thereon) was exchanged for$0.64 principal amount of Senior Surplus Notes (in factored par value, and the associated amount of accrued and unpaid interest thereon) on the date of Closing. The Closing occurred onJanuary 22, 2021 . The Agreement contains customary representations and warranties from each of AAC, AFG and the Note Holders. Pursuant to the terms of the Agreement, all Interests held by the Note Holders will be subject to the terms of the Agreement and may not be transferred other than pursuant to the terms thereof. Subject to certain exclusions, Note Holders may transfer Interests, provided that any transferee of such Interests signs a joinder agreement to the Agreement. The foregoing summary of the Agreement is qualified in its entirety by reference to the text of the Agreement, which is attached as Exhibit 10.1 to this Form 8-K and is incorporated herein by reference. Senior Surplus Notes As described above, AAC has agreed to exchange the Interests and the Certificate for$266,807,712 aggregate principal amount of AAC's Senior Surplus Notes (in factored par value). The Senior Surplus Notes are governed by theFiscal Agency Agreement, dated as ofJune 7, 2010 , betweenAAC andThe Bank of New York Mellon , as fiscal agent (as amended or supplemented from time to time, the "Fiscal Agency Agreement"). The additional Senior Surplus Notes exchanged pursuant to the Purchase Agreement will be part of the same series as, and rank equally with, the existing Senior Surplus Notes previously issued. After giving effect to the exchange,$840,306,243 principal amount of Senior Surplus Notes (in factored par value) are outstanding, which is equivalent to a principal amount of$1,138,990,039 (in non-factored par value), and total principal and accrued and unpaid interest of Senior Surplus Notes outstanding is$1,389,624,795 (in factored par value). Outstanding Senior Surplus Note amounts include the amount owned by AFG, which amount is eliminated in consolidation for purposes of US generally accepted accounting principles. The Senior Surplus Notes have a scheduled maturity date ofJune 7, 2020 and accrue interest at a rate of 5.1% per annum on any unpaid principal or interest through the actual date of payment. All payments of principal and interest on the Senior Surplus Notes are subject to the prior approval of the OCI. Since the 1 -------------------------------------------------------------------------------- issuance of the Senior Surplus Notes in 2010, OCI has declined to approve regular payments of interest on surplus notes, with certain exceptions for exceptional payments. The foregoing summary and description of the Senior Surplus Notes is qualified in its entirety by reference to the Fiscal Agency Agreement, which is filed as Exhibits 4.12 and 4.13 to our Annual Report on Form 10-K. Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference in this Item 2.03. Item 7.01. Regulation FD Disclosure. OnJanuary 25, 2021 , AFG issued a press release to announce the Transaction, a copy of which is attached as Exhibit 99.1 hereto and is incorporated herein by reference. The information furnished pursuant to this Item 7.01, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended or the Exchange Act. Forward-Looking Statements In this report, statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "estimate," "expect," "project," "plan," "believe," "anticipate," "intend," "planned," "potential" and similar expressions, or future or conditional verbs such as "will," "should," "would," "could," and "may," or the negative of those expressions or verbs, identify forward-looking statements. We caution readers that these statements are not guarantees of future performance. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, which may by their nature be inherently uncertain and some of which may be outside our control. These statements may relate to plans and objectives with respect to the future, among other things which may change. We are alerting you to the possibility that our actual results may differ, possibly materially, from the expected objectives or anticipated results that may be suggested, expressed or implied by these forward-looking statements. Important factors that could cause our results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed under "Risk Factors" in our most recentSEC filed quarterly or annual report. Any or all of management's forward-looking statements here or in other publications may turn out to be incorrect and are based on management's current belief or opinions. AFG's actual results may vary materially, and there are no guarantees about the performance of AFG's securities. Among events, risks, uncertainties or factors that could cause actual results to differ materially are: (1) the highly speculative nature of AFG's common stock and volatility in the price of AFG's common stock; (2) uncertainty concerning the Company's ability to achieve value for holders of its securities, whether from AAC and its subsidiaries or from transactions or opportunities apart from AAC and its subsidiaries, including new business initiatives; (3) changes in AFG's estimated representation and warranty recoveries or loss reserves over time; (4) failure to recover claims paid onPuerto Rico exposures or incurrence of losses in amounts higher than expected; (5) adverse effects on AFG's share price resulting from future offerings of debt or equity securities that rank senior to AFG's common stock; (6) potential of rehabilitation proceedings against AAC; (7) dilution of current shareholder value or adverse effects on AFG's share price resulting from the issuance of additional shares of common stock; (8) inadequacy of reserves 2 --------------------------------------------------------------------------------
established for losses and loss expenses and possibility that changes in loss
reserves may result in further volatility of earnings or financial results; (9)
increased fiscal stress experienced by issuers of public finance obligations or
an increased incidence of Chapter 9 filings or other restructuring proceedings
by public finance issuers, including an increased risk of loss on revenue bonds
of distressed public finance issuers due to judicial decisions adverse to
revenue bond holders; (10) AFG's inability to realize the expected recoveries
included in its financial statements; (11) insufficiency or unavailability of
collateral to pay secured obligations; (12) credit risk throughout AFG's
business, including but not limited to credit risk related to residential
mortgage-backed securities, student loan and other asset securitizations, public
finance obligations (including obligations of the
3--------------------------------------------------------------------------------
© Edgar Online, source
