Ambac Expands Role of CEO as Hedge Fund Steps Up Criticism

  • Tavakoli will serve as president and CEO of Ambac Assurance
  • Ambac insures $10 billion of Puerto Rico debt payments

Ambac Financial Group Inc. said President and Chief Executive Officer Nader Tavakoli will also head a subsidiary unit of the bond insurer as shareholder Canyon Capital Advisors increased criticism of his compensation and the company’s performance.

Tavakoli will serve as president and CEO of Ambac Assurance Corp., the company’s principal operating subsidiary, the New York-based insurance company said in a statement Wednesday.

“Nader is an exemplary leader, with the right skills and experience to lead Ambac and AAC,” Jeffrey S. Stein, Ambac’s chairman of the board, said in the statement. “We look forward to his continued guidance at both the group and operating company levels.”

Ambac is one of the largest bond insurers that guarantees repayment on Puerto Rico securities. The company insurers nearly $10 billion of gross principal and interest on various commonwealth bonds through 2054, as of Dec. 31, according to Ambac’s website. Puerto Rico is negotiating with bondholders and creditors to help reduce its $70 billion debt load by asking investors to accept losses on their securities.

Prior to the company’s announcement, Canyon Capital, which owns about 5 percent of Ambac’s shares, questioned Tavakoli’s management and highlighted the company’s drop in stock price since he became interim president and chief executive on Jan. 1, 2015.

Bankruptcy Exit

The insurer filed for Chapter 11 bankruptcy protection in November 2010 to reschedule payments on more than $1 billion of bonds and other claims. It exited bankruptcy in May 2013.

Shares of Ambac have plunged about 34 percent since the end of 2014. The stock rose 29 cents, or 1.6 percent, to $16.32 Wednesday at 2:47 p.m. in New York.

The price drop “reflects the market’s disappointment and concern with respect to his selection,” the hedge fund said in a statement.

Canyon also questioned Tavakoli’s compensation given the stock’s performance. He earned $225,000 in 2014 and received a $250,011 stock award, according to Ambac’s financial filings. He compensation plan could enable him to earn over $40 million through 2018, Canyon said.

“That is a mind-boggling sum for a company whose market capitalization was approximately $630 million when Mr. Tavakoli’s current compensation package was granted,” the hedge fund said.

Abbe Goldstein, a spokeswoman for Ambac, didn’t immediately respond to an e-mail seeking comment on Canyon Capital’s statement.

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