PMA Capital Adopts NOL Rights Plan
August 06 2009 - 3:06PM
Business Wire
PMA Capital Corporation (NASDAQ:PMACA) today announced
that its Board of Directors terminated the shareholder rights plan
adopted by the Company in May 2000 and adopted a shareholder rights
plan designed to protect the Company’s ability to utilize its net
operating loss carryforwards and other tax assets. PMA Capital
reported net operating loss carryforwards totaling approximately
$230 million as of June 30, 2009. United States Federal income tax
rules, and Section 382 of the Internal Revenue Code in particular,
substantially limit the use of those tax assets if PMA Capital
experiences an “ownership change.” In general, an ownership change
occurs if there is a cumulative change in the ownership of PMA
Capital by “5% shareholders” that exceeds 50 percentage points over
a rolling three-year period.
Vincent T. Donnelly, President and Chief Executive Officer said,
“This shareholder rights plan is designed to protect the
substantial value that we expect PMA Capital’s net operating loss
carryforwards will provide. We believe that the rights plan is in
the best interests of PMA Capital’s shareholders as it will reduce
the risk of an ownership change occurring amongst our largest
shareholders. The rights plan was not adopted as an anti-takeover
measure, it has a limited term and it will expire once we are able
to utilize the tax assets that are available to the Company.”
The rights plan seeks to reduce the likelihood of such an
ownership change by encouraging shareholders wanting to exceed the
5% ownership threshold to discuss their plans with PMA Capital. The
rights plan permits existing 5% shareholders to increase their
share ownership so long as they do not equal or exceed the
statutory limit of 10% of outstanding PMA Capital common shares.
The acquisition of a total of 10% or more of PMA Capital’s
outstanding common shares by existing 5% shareholders would require
the prior approval of state insurance regulators and, unless
exempted by PMA Capital’s Board of Directors, would trigger the
rights plan.
PMA Capital’s Board of Directors declared a dividend of one
preferred stock purchase right for each outstanding common share as
of the close of business on August 17, 2009. Common shares issued
after that date will also receive the rights. Subject to certain
limited exceptions, if any person or group becomes a 5% shareholder
of PMA Capital without first obtaining the approval of the
Company’s Board of Directors, holders of the rights would become
entitled to purchase securities of the Company that would
significantly dilute the voting power and economic ownership of the
acquiring shareholder. Rights owned by the acquiring shareholder
would become void. Persons who were 5% shareholders on the date the
rights plan was adopted and properly filed a Schedule 13G
indicating their ownership before such date only trigger the rights
if they acquire additional common shares so that their ownership
equals or exceeds 10% of PMA Capital’s outstanding common
shares.
Shareholders will have the opportunity to approve the plan at
PMA Capital’s next annual meeting of shareholders. The plan will
expire on August 6, 2010 if not approved by shareholders before
that date. The rights plan terminates if Section 382 of the
Internal Revenue Code is repealed or if PMA Capital utilizes all of
its net operating loss carryforwards and other tax assets that are
subject to limitation under Section 382. The latest that the rights
plan will expire is August 6, 2019.
A detailed summary of the rights plan will be mailed to PMA
Capital’s shareholders of record on August 17, 2009. A copy of the
rights plan will be filed as an exhibit to a registration statement
on Form 8-A to be filed with the Securities and Exchange
Commission. The Form 8-A and the rights plan will be accessible on
the Securities and Exchange Commission’s website at
www.sec.gov.
CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR”
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995
with respect to the plans, objectives and expectations of the
Company’s management. Forward-looking statements can generally be
identified by use of forward-looking terminology such as “may,”
“will,” “plan,” “expect,” “intend,” “seek” “anticipate,” and
“believe.” These forward-looking statements may include estimates,
assumptions or projections and are based on currently available
data and the Company’s current operating plans. All forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by the forward-looking statements. The factors that could cause
actual results to differ materially from those in the
forward-looking statements, include, but are not limited to:
- adequacy of reserves for claim
liabilities, including reserves for potential environmental and
asbestos claims;
- any future lowering or loss of
one or more of our financial strength and debt ratings, and the
adverse impact that any such downgrade may have on our ability to
compete and to raise capital, and our liquidity and financial
condition;
- adequacy and collectibility of
reinsurance that we purchase;
- uncertainty as to the price and
availability of reinsurance on business we intend to write in the
future, including reinsurance for terrorist acts;
- the effects of emerging claims
and coverage issues, including changing judicial interpretations of
available coverage for certain insured losses;
- the success with which our
independent agents and brokers sell our products and our ability to
collect payments from them;
- regulatory changes in risk-based
capital or other standards that affect the cost of, or demand for,
our products or otherwise affect our ability to conduct business,
including any future action with respect to our business taken by
the Pennsylvania Insurance Department or any other state insurance
department;
- our concentration in workers’
compensation insurance, which makes us particularly susceptible to
adverse changes in that industry segment;
- our ability to consummate the
sale of our Run-off Operations in a timely manner;
- severity of natural disasters
and other catastrophes, including the impact of future acts of
terrorism, in connection with insurance and reinsurance
policies;
- uncertainties related to
possible terrorist activities or international hostilities and
whether the Terrorism Risk Insurance Program Reauthorization Act of
2007 is extended beyond its December 31, 2014 termination
date;
- our ability to effectively
compete in the highly competitive property and casualty insurance
industry;
- adverse economic or regulatory
developments in the eastern part of the United States, particularly
those affecting Pennsylvania, New York and New Jersey;
- fluctuations in interest rates
and other events that can adversely impact our investment
portfolio;
- disruptions in the financial
markets that affect the value of our investment portfolio and our
ability to sell our investments;
- our ability to repay our
indebtedness;
- our ability to raise additional
capital on financially favorable terms when required;
- restrictions on our operations
contained in any document governing our indebtedness;
- the impact of future results on
the value of recorded goodwill and other intangible assets and the
recoverability of our deferred tax asset;
- our ability to attract and
retain qualified management personnel;
- the outcome of any litigation
against us;
- provisions in our charter
documents that can inhibit a change in control of our company;
and
- other factors or uncertainties
disclosed from time to time in our filings with the Securities and
Exchange Commission.
You should not place undue reliance on any forward-looking
statements in this press release. Forward-looking statements are
not generally required to be publicly revised as circumstances
change and we do not intend to update the forward-looking
statements in this press release to reflect circumstances after the
date of this press release or to reflect the occurrence of
unanticipated events.
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