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Ambac Financial Group Inc. (ABK) said it wrote down $228 million in
collateralized-debt obligations in April as it continues to be weighed down by
the credit crunch.

In a monthly update on its pretax financial data, the second-largest bond insurer
also reported a $53.4 million loss on fair-value changes in its investment
portfolio more than offset $42.2 million in net investment income.

Ambac noted Wednesday that the estimated changes in fair value on credit
derivatives may not included all adjustments that would be included in its
quarterly results. Likewise, the firm said it performs its impairment analysis on
a quarterly basis, and so the monthly results do not include any such effects.

Ambac recorded $1.73 billion in write-downs on CDOs of asset-backed securities in
the first quarter. Of that, the company expected to realize $940.4 million in
estimated credit impairment, which means Ambac expects to pay out that much on
its guarantees.

Shares of Ambac were recently down 1.9% to $3.17.

Ambac is in the midst of a six-month pause in writing new transactions in the
structured finance market and has discontinued underwriting certain
structured-finance businesses, including CDOs and residential mortgage-backed
securities.

The company in March raised $1.5 billion, tripling its shares outstanding, and
said it would stop insuring mortgage-backed debt to defend the key AAA rating at
subsidiary Ambac Assurance. The plan received a skeptical reaction from
investors, who were hoping for a bigger rescue via a direct injection of funds by
banks.

Earlier this month, the company said its bond insurer units remain in compliance
with the terms and conditions of their $400 million credit facility, which
remains undrawn. But Moody’s Investor Service has said Ambac’s operating unit is
still at risk for a downgrade, and that any further ratings action would be
driven by the performance of the mortgage market and Moody’s view on whether
Ambac can maintain sufficient capitalization.

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