Ambac Financial Group, Inc. (NYSE: ABK) (Ambac or the Company) announced today that its Board of Directors decided not to make the regularly scheduled interest payment due today, November 1, 2010, on the Company’s 7.50% Debentures due May 1, 2023 (“2023 Notes”). If the interest is not paid within 30 days of today, an event of default will occur under the indenture for the 2023 Notes. The occurrence of an event of default would permit the holders of the 2023 Notes to accelerate the maturity of the notes. As of June 30, 2010, the Company had total indebtedness of $1,622 million. The next scheduled payment of interest on the Company’s indebtedness is November 15, 2010.

To date, the Company has been unable to raise additional capital as an alternative to seeking bankruptcy protection. As such, the Company is currently pursuing, with an ad-hoc committee of senior debt holders, a restructuring of its outstanding debt through a prepackaged bankruptcy proceeding. There can be no assurance that any definitive agreement will be reached. If the Company is unable to reach agreement on a prepackaged bankruptcy in the near term, it intends to file for bankruptcy under Chapter 11 of the United States Bankruptcy Code prior to the end of the year. Such filing may be with or without agreement with major creditor groups concerning a plan of reorganization. The filing for bankruptcy protection would accelerate the maturity of all of the Company’s indebtedness.

A significant consideration for any restructuring or reorganization is the impact, if any, on the Company’s estimated $7.0 billion net operating loss (“NOLs”) tax carry forward. The Company considers the NOLs to be a valuable asset. However, the Company’s ability to use the NOLs could be substantially limited if an ownership change were to occur, as defined under Section 382 of the Internal Revenue Code of 1986 and further detailed in the Form 8-K filed today by the Company with the SEC (available at www.sec.gov or on the Company’s web site at www.ambac.com). Earlier this year, the Company entered into a Tax Benefit Preservation Plan to reduce the risk of an ownership change resulting from the trading of the Company’s stock. Nevertheless, if the Company files for bankruptcy protection, stock issued to the Company’s debt holders in connection with a reorganization could trigger an ownership change if a significant portion of the debt being exchanged had been held by such debt holders for less than 18 months prior to the filing for bankruptcy. Accordingly, extensive buying of the Company’s debentures prior to a bankruptcy filing by persons or institutions who could hold 5% or more of the Company’s stock following a bankruptcy reorganization could substantially limit the Company’s ability to use its NOLs in the future.

Prior to the occurrence of an event of default under the indenture for the 2023 Notes, the Company intends either (i) to pay interest on the 2023 Notes, (ii) to solicit acceptances for a prepackaged plan of reorganization and, if such solicitation is successful, then to file for bankruptcy with a related prepackaged plan, or (iii) to file for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Several factors may influence which of the above courses of action the Company may take, including the status of negotiations with the ad hoc committee of senior debt holders and actions required to preserve the NOLs.