ABK Ambac Financial Grp. Common Stock

Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced that it has partnered with the United States Air Force, Balfour Beatty Construction Co., as developer, and Capmark Finance, as lender, to finance the $264 million Air Mobility Command (AMC) West military housing transaction. The transaction involves the privatization of over 3,500 existing single-family and townhouse-style housing units at three separate bases � Fairchild Air Force Base in Spokane, Washington; Tinker Air Force Base in Oklahoma City, Oklahoma; and Travis Air Force Base in Fairfield, California. At the end of the seven-year development period the financing will provide 2,400 new and rehabilitated homes for service members and their families at the bases. The three bases make up the western component of the Air Force's AMC. AMC's mission is to provide rapid airlift, air refueling, special air mission, and aero-medical evacuation for the military. The project will primarily be financed by $264 million in taxable mortgage loans insured by Ambac. In addition to the insured loans, other sources of funds will include a $137 million subordinate loan provided by the Air Force; an equity contribution of $14 million from the developer; a $6 million equity contribution from the Air Force, and net operating income and interest earnings during the development period. The transaction received public ratings from Standard & Poor's of AA+ (Series A1-a), AA- (Series A1-b) and A (Series A2). The transaction priced on July 10, 2008 and the Series A1-a and Series A2 loans are scheduled to close on July 21, 2008. The Series A1-b loans are scheduled to close on June 1, 2010 with Ambac�s forward commitment to provide insurance at that date. For over a decade Ambac has been a leader in the military housing privatization sector. Our expertise in sound deal structuring was forged over many years of active collaboration with lenders, underwriters, private developers, and representatives of all branches of the military service. Since 1998 Ambac has guaranteed approximately $7.8 billion in military housing debt securities, providing developers and underwriters with efficient, cost effective access to the capital markets for the development of quality military family housing at installations nationwide. Investors have trusted and relied upon Ambac�s underwriting expertise and stringent portfolio performance monitoring as part of their decision to direct capital to this critical, high-priority initiative of the U.S. Department of Defense. Ambac Senior Managing Director and head of Public Finance, Robert Shoback, stated, �This transaction demonstrates the value Ambac adds is beyond the interest rate benefits associated with our guarantee. Large, sophisticated investors in the market purchased these Ambac-wrapped certificates based on key aspects of our underwriting and surveillance process, including: (i) our conservative, independent, and thorough analysis of the transaction which included a site visit and independent legal review; (ii) our development of proprietary internal modeling for stress testing military housing transactions; (iii) our structuring expertise, particularly to mitigate construction risks; (iv) our serving as sole bond holder representative monitoring the transaction on a monthly basis; (v) our performance of ongoing surveillance, giving us the ability to intervene early to correct troublesome trends; and (vi) our providing direct access to underwriters and openly providing reports to fixed income investors.� Mr. Shoback continued, �Ambac has long-standing relationships with many key developers, lenders and underwriters and we expect to continue to underwrite transactions in this sector.� 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, 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 from March 6, 2008; (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)�changes in expectations regarding future realization of gross deferred tax assets; (30) other factors 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 in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, 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 (31)�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 a Aa3 rating from Moody's Investors Service, Inc. and a AA rating from Standard & Poor's Ratings Services; Moody�s rating is on negative outlook while Standard & Poor's maintains a credit watch negative. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).