ABK Ambac Financial Grp. Common Stock

Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced that it is pleased to have partnered with clients who have sought ways in which to mitigate the impact of the recent turmoil in the financial markets which has created unexpected increases in interest rates on auction rate and other variable rate debt. Ambac believes that some of these options may represent feasible alternatives for other participants in the variable rate financing marketplace. Among the potential alternatives, issuers and their advisors may want to consider the following: Letter of Credit Wraps Banks have been willing to provide direct-pay letters of credit to provide additional credit enhancement and liquidity for existing transactions, including auction rate securities being converted to variable rate demand bonds. The Ambac bond insurance policy can remain in effect in these deals, preserving the value of the policy. Ambac and a client closed an initial transaction in mid-March and we are currently documenting several others following this format. Key components include: Letter of credit pays principal and interest and is reimbursed by issuer/borrower Ambac wraps reimbursement obligations to bank for credit draws Ambac may be willing to cover a term-out of Bank Bonds in certain circumstances Ambac controls acceleration and most remedies Most banks are comfortable with Ambac retaining control until an Ambac payment default Other banks have the right to force a redemption with an LC draw following an issuer/borrower payment default (with contemporaneous cancellation of any Ambac-related exposure to swaps and debt service reserve funds), ending Ambac�s involvement in the deal and taking control of remedies Standby Amendments Most Standby Bond Purchase Agreements (�SBPAs�) contain Immediate Termination Events (�ITEs�) based on events related to the bond insurer. Certain credits have successfully amended their SBPAs to either remove the ITEs (permanently or temporarily) or to change them to relate to both the bond insurer and the obligor or, in select cases, solely to the obligor. Ambac has worked with a number of clients who have benefited from this change through lower interest rate resets. Conversion to Term Mode (1 or more years) Some deals have opted to convert to a Term Mode, ranging from one to five years, with the purchaser benefiting from the insurance policy. To accommodate the conversion, Ambac has consented to the mode change and, for select credits, waived the requirement that a liquidity facility be in place to cover the put at the end of the Term Mode, allowing issuers to stabilize rates but retain flexibility over the longer term. The underlying credit and liquidity strength, as well as the consequences under the bond documents if there is a failed remarketing at the end of the Term Mode, are key considerations in these transactions. Issuers Buying Their Bonds Ambac has consented to allow issuers and borrowers to buy their auction rate and variable rate demand bonds and hold them for a limited time, while retaining the benefit of the Ambac policy over the longer term. Some clients fund this from cash on hand; others are obtaining loans or issuing other debt. Clients hold the bonds subject to limitations on transfer to other parties. Ambac has approved this option for several clients and, with recent guidance from the SEC, a more defined structure should emerge in the marketplace to implement it, based on input from bond counsel and investment bankers. Trust Structures Some Ambac clients are in the process of forming limited purpose trusts to purchase their Ambac-wrapped bonds, with funding obtained from a bank loan or other debt and secured by a lien on the bonds. As with the situation where the issuer buys its own bonds, this has the advantage of preserving the bond insurance for the long term, since the trust can be broken when market rates return to equilibrium. Transfers of the bonds are restricted and the trust and any lenders waive their right to make a claim on the bond insurance policy while the bonds are held under such a structure. Exchanges of Bonds Subject to compliance with recent Treasury notices and other applicable law, issuers and borrowers may be able to �exchange� New Bonds for Old Bonds, which will be cancelled and no longer outstanding under the old bond documents, giving issuers the benefit of a refunding without most of the burdens. In connection with such transactions, Ambac would require that any related Ambac-insured swaps be terminated or the swap sureties cancelled and returned and any debt service reserve fund sureties also be cancelled and returned. Fixed Rate Refundings Certain issuers and borrowers may be unable to undertake one of these alternatives and may wish to eliminate their exposure to variable rate debt. Ambac is in discussions with some clients in an attempt to structure Ambac-wrapped fixed-rate refundings with economically attractive terms. The options briefly summarized above may prove beneficial for you or your clients and Ambac welcomes the opportunity to discuss these and other alternatives in more detail at your convenience. Please contact your client representative or email us for further discussion at consents@ambac.com. We look forward to hearing from you and continuing to work with you to achieve your financial goals. Forward-Looking Statements This release contains statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any or all of management�s forward-looking statements here or in other publications may turn out to be wrong and are based on Ambac�s management current belief or opinions. Ambac�s actual results may vary materially, and there are no guarantees about the performance of Ambac�s securities. Among events, risks, uncertainties or factors that could cause actual results to differ materially are: (1)�changes in the economic, credit, foreign currency or interest rate environment in the United States and abroad; (2)�the level of activity within the national and worldwide credit markets; (3)�competitive conditions and pricing levels; (4)�legislative and regulatory developments; (5)�changes in tax laws; (6) changes in our business plan, including changes resulting from our decision to discontinue writing new business in the financial services area, to significantly reduce new underwriting of structured finance business and to discontinue all new underwritings of structured finance business for six months; (7)�the policies and actions of the United States and other governments; (8)�changes in capital requirements whether resulting from downgrades in our insured portfolio or changes in rating agencies� rating criteria or other reasons; (9)�changes in Ambac�s and/or Ambac Assurance�s credit or financial strength ratings; (10)�changes in accounting principles or practices relating to the financial guarantee industry or that may impact Ambac�s reported financial results; (11)�inadequacy of reserves established for losses and loss expenses; (12)�default by one or more of Ambac Assurance�s�portfolio investments, insured issuers, counterparties or reinsurers; (13)�credit risk throughout our business, including large single exposures to reinsurers; (14)�market spreads and pricing on insured collateralized debt obligations (�CDOs�) and other derivative products insured or issued by Ambac; (15)�credit risk related to residential mortgage securities and CDOs; (16)�the risk that holders of debt securities or counterparties on credit default swaps or other similar agreements seek to declare events of default or seek judicial relief or bring claims alleging violation or breach of covenants by Ambac or one of its subsidiaries; (17)�the risk that our underwriting and risk management policies and practices do not anticipate certain risks and/or the magnitude of potential for loss as a result of unforeseen risks; (18)�the risk of volatility in income and earnings, including volatility due to the application of fair value accounting, or FAS 133, to the portion of our credit enhancement business which is executed in credit derivative form; (19)�operational risks, including with respect to internal processes, risk models, systems and employees; (20)�the risk of decline in market position; (21)�the risk that market risks impact assets in our investment portfolio; (22)�the risk of credit and liquidity risk due to unscheduled and unanticipated withdrawals on investment agreements; (23)�changes in prepayment speeds on insured asset-backed securities; (24) factors that may influence the amount of installment premiums paid to Ambac; (25)�the risk that we may be required to raise additional capital, which could have a dilutive effect on our outstanding equity capital and/or future earnings; (26)�our ability or inability to raise additional capital, including the risks that regulatory or other approvals for any plan to raise capital are not obtained, or that various conditions to such a plan, either imposed by third parties or imposed by Ambac or its Board of Directors, are not satisfied and thus potentially necessary capital raising transactions do not occur, or the risk that for other reasons the Company cannot accomplish any potentially necessary capital raising transactions; (27)�the risk that Ambac�s holding company structure and certain regulatory and other constraints, including adverse business performance, affect Ambac�s ability to pay dividends and make other payments; (28)�the risk of litigation and regulatory inquiries or investigations, and the risk of adverse outcomes in connection therewith, which could have a material adverse effect on our business, operations, financial position, profitability or cash flows; (29)�other additional factors described in the Risk Factors section of Ambac�s Current Report on Form 8-K dated March 12, 2008 and in its Annual Report on Form 10-K for the fiscal year December 31, 2007 and also disclosed from time to time by Ambac in its subsequent reports on Form 10-Q and Form 8-K, which are or will be available on the Ambac website at www.ambac.com and at the SEC�s website, www.sec.gov; and (30)�other risks and uncertainties that have not been identified at this time. Readers are cautioned that forward-looking statements speak only as of the date they are made and that Ambac does not undertake to update forward-looking statements to reflect circumstances or events that arise after the date the statements are made. You are therefore advised to consult any further disclosures we make on related subjects in Ambac�s reports to the SEC. Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac's principal operating subsidiary, Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations, has earned triple-A ratings from Moody's Investors Service, Inc. and Standard & Poor's Ratings Services; and a double-A rating from Fitch, Inc. Moody's, Standard & Poor's and Fitch all maintain a �negative outlook�. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).