(Reuters) - Hedge fund Canyon Capital Advisors LLC is preparing to challenge the leadership of Ambac Financial Group Inc (O:AMBC) by putting its own nominees up for election to the company's board, a person familiar with the matter said.
Canyon, which holds a 4.5 percent stake in the company, is seeking to persuade Ambac to settle $4 billion in insurance claims, which Canyon has a significant interest in.
The hedge fund plans to nominate at least three Ambac directors to stand for election ahead of a March 15 deadline, the person said on Wednesday, in what is known as a proxy contest. Details of its proposed slate are still being finalized, the person added.
The person asked not to be identified because the deliberations are confidential. Ambac declined to comment, while Canyon did not immediately respond to requests for comment.
The policy claims relate to complex financial instruments, including secured mortgage-backed securities, that were insured by Ambac and were at the center of the financial crisis that began around 2007-2008.
Canyon has previously asked for Ambac to ask its regulator, the Commissioner of Insurance of the State of Wisconsin, to accelerate Ambac’s settlement of the claims. Ambac has argued the matter is entirely in the hands of the regulator.
Canyon has also asked Ambac to buy back the claims itself in the open market or offer policyholders cash for their policies, in a practice known in the industry as commutation. This would also boost the value of the claims that Canyon has an interest in.
Canyon has also raised corporate governance issues at Ambac, questioning the pay and performance of the company's chief executive Nader Tavakoli.