WINSTON-SALEM, N.C.,
Sept. 14 /PRNewswire-FirstCall/ --
Triad Guaranty Inc. (OTCBB: TGIC) (the "Company"), today announced
that its board of directors has adopted a Tax Benefits Preservation
Plan (the "Plan") to help protect the ability of the Company and
its subsidiaries to recognize certain potential tax benefits in
future periods from net unrealized built-in losses and tax credits
(the "Tax Benefits"). This Plan is similar to tax benefits
preservation plans adopted by other public companies with
significant tax assets.
The ability to employ the Tax Benefits depends on future taxable
income and limitations imposed by tax laws; however, ability of the
Company and its subsidiaries to use their respective Tax Benefits
would be substantially limited if there were an "ownership change"
of the Company as defined under Section 382 of the Internal Revenue
Code and related Internal Revenue Service pronouncements. In
general, an ownership change would occur if the Company's "5%
shareholders," as defined under Section 382, collectively increase
their ownership in the Company by more than 50 percentage points
over a rolling three-year period.
As part of the Plan, the Company's board of directors declared a
dividend of one preferred share purchase right (a "Right") for each
outstanding share of its common stock. The dividend will be
payable to holders of record as of the close of business on
September 27, 2010, but the Rights
would only be activated if triggered by the Plan.
The Rights will be triggered in any instance of a person
becoming a 5% shareholder or by an existing 5% shareholder
increasing its ownership percentage (subject to certain
exceptions). If triggered, each Right would become
exercisable, which could result in significant economic dilution to
such acquiring person.
The Rights will trade with, and be represented by, the existing
common stock of the Company and no further action by stockholders
is necessary unless and until a triggering event occurs and the
Rights become exercisable. Should the Rights become exercisable,
the Company will notify stockholders.
The Rights expire on the earliest of:
- May 31, 2014;
- the time at which all Rights are redeemed or exchanged;
- the first day of a taxable year of the Company as to which the
Company's board of directors determines that no tax benefits may be
carried forward;
- a date, prior to the date of the first public announcement that
the plan has been triggered, on which the Company's board of
directors determines that the Rights and the Plan are no longer
necessary for the preservation or existence of the tax benefits or
are no longer in the best interests of the Company and its
stockholders;
- the failure of stockholders to approve the Plan at the 2011
annual meeting of the Company's stockholders; and
- the repeal or amendment of Section 382 or any successor
statute, if the Company's board of directors determines that the
Plan is no longer necessary for the preservation of tax
benefits.
The issuance of the Rights will not affect the Company's
reported earnings per share, is not taxable to the Company or its
stockholders and will not change the way in which Company shares
are traded prior to the triggering of the Rights.
Additional information regarding the Plan will be contained in a
Form 8-K and in a Registration Statement on Form 8-A that the
Company is filing with the Securities and Exchange Commission.
In addition, Company stockholders of record as of
September 27, 2010 will be mailed a
detailed summary of the Plan.
Triad Guaranty Inc.'s wholly owned subsidiary, Triad Guaranty
Insurance Corporation, is a nationwide mortgage insurer pursuing a
run-off of its existing in-force book of business. For more
information, please visit the Company's web site at
www.triadguaranty.com.
Certain of the statements contained in this release are
"forward-looking statements" and are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are subject to change,
uncertainty and circumstances that are, in many instances, beyond
our control and they have been made based upon our current
expectations and beliefs concerning future developments and their
potential effect on us. Actual developments and their results could
differ materially from those expected by us, depending on the
outcome of a number of factors, including the various factors
described under "Risk Factors" and in the "Safe Harbor Statement
under the Private Securities Litigation Reform Act of 1995" in our
Annual Report on Form 10-K for the year ended December 31, 2009 and in other reports and
statements filed with the Securities and Exchange
Commission. The Plan is designed to deter certain
transfers of our common stock that could result in an "ownership
change." However, the Plan does not deter all types of
transfers that could result in an ownership change, such as sales
of our common stock, nor does the Plan prevent transfers of our
common stock. Accordingly, there can be no assurance that the
Plan will deter or prevent an ownership change. The ability
to employ net operating losses, loss carryforwards and other tax
assets depends on future taxable income and limitations imposed by
tax laws, and there can be no guarantee that such benefits may be
realized by the Company or its subsidiaries. Forward-looking
statements are based upon our current expectations and beliefs
concerning future events and we undertake no obligation to update
or revise any forward-looking statements to reflect the impact of
circumstances or events that arise after the date the
forward-looking statements are made, except as otherwise required
by law.
SOURCE Triad Guaranty Inc.
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