Ambac Closes $1.5B Stock, Equities Offering >ABK

Mar.12, 2008 in Market Outlook

Ambac Announces the Closing of Its Common Stock and Equity Unit Offerings for an
Aggregate Capital Raise of $1.5 Billion

NEW YORK, Mar 12, 2008 (BUSINESS WIRE) — Ambac Financial Group, Inc. (ABK)
(Ambac) today announced that it has successfully closed its $1.155 billion public
offering of 171,111,111 shares of common stock, par value $0.01 per share, at
$6.75 per share. Ambac also placed 14,074,074 shares of common stock in a private
placement for $95 million with two financial institutions.

In addition, Ambac announced that it has also completed its $250 million public
offering of 5 million equity units, with a stated amount of $50 per unit. The
equity units carry a total distribution rate of 9.5%. The threshold appreciation
price of the equity units is $7.97 which represents a premium of approximately
18% over the concurrent public offering price of Ambac’s common stock of $6.75
per share.

Michael Callen, Chairman and CEO of Ambac Financial Group, commented that, “We
were able to execute a significant capital raise in a very challenging market.
For this, we are thankful to our investors and other market participants for
their strong support. Throughout this process, we remained focused on our
ultimate goal of safe-guarding and protecting our triple-A franchise. This is a
critical milestone in our plan to restore market confidence in our financial
strength. The current market environment offers an excellent opportunity for
Ambac to capitalize on its long-standing relationships in many sectors.”

As previously disclosed, Ambac currently intends to contribute the net proceeds
from these offerings to its insurance company subsidiary Ambac Assurance
Corporation in order to increase its capital position, less approximately $100
million, which it intends to retain at Ambac to provide incremental holding
company liquidity to pay principal and interest on its indebtedness, to pay its
operating expenses and to pay dividends on its capital stock. Proceeds from the
settlement of the purchase contracts forming a part of the equity units, in May
2011, will be used to repay $142.5 million of the company’s debt maturing August
1, 2011, to the extent that the cash proceeds of such settlement are sufficient
for such repayment. The remaining proceeds will be retained at Ambac. Proceeds
from the settlement of the purchase contracts will not be used to repurchase
common stock.

Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., Banc of
America Securities LLC and UBS Investment Bank were joint book-running managers,
and Keefe, Bruyette & Woods, Inc., Dresdner, Kleinwort Securities LLC, BNY
Capital Markets, Inc. and KeyBanc Capital Markets Inc. were co-managers, for the
common stock offering. Credit Suisse Securities (USA) LLC, Citigroup Global
Markets Inc., Banc of America Securities LLC and UBS Investment Bank were joint
book-running managers, and Keefe, Bruyette & Woods, Inc. was also a co-manager,
for the equity units offering. Sandler O’Neill + Partners, L.P. served as
independent financial advisor to Ambac with respect to these offerings.

This announcement does not constitute an offer to sell or a solicitation to buy
any of these securities, nor shall there be any sale of these securities in any
jurisdiction in which such an offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction. Ambac has filed a registration statement (including a prospectus
and two prospectus supplements) with the SEC for the offerings to which this
communication relates. These documents are available, at no cost, by visiting
EDGAR on the SEC Web site at http://www.sec.gov.

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,
including the transactions contemplated hereby; (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 factors discussed under “Risk
Factors” in this prospectus supplement, described in the Risk Factors section in
Part I, 1A of our Annual Report on Form 10-K for the fiscal year ended 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
http://www.ambac.com and at the SEC’s website, www.sec.gov;