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Ambac Assurance launches exchange offer for auction market preferred shares

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Ambac Assurance launches exchange offer for auction market preferred shares

Ambac Assurance Corp. began an offer to exchange its auction market preferred shares for new notes and also began soliciting proxies to vote in favor of a resolution at a special shareholder meeting to authorize the transaction.

Ambac will also seek approval for an amendment to its restated articles of incorporation to remove the purported right of the holders of the preferred shares to elect Ambac Assurance directors in certain circumstances. The company needs the affirmative vote of the holders of at least two-thirds in aggregate liquidation preference of preferred shares for the purchases and the charter amendment to take place, as well as the affirmative vote of the holders of at least two-thirds of its outstanding common shares for the charter amendment to push through.

Ambac Financial Group Inc. and its subsidiaries, including Ambac Assurance, are offering to exchange all of Ambac Assurance's outstanding auction market preferred shares for 5.1% senior surplus notes due 2020 from Ambac Assurance and for cash and warrants to purchase the parent company's common shares from Ambac Financial.

The companies noted that holders of 89% in liquidation preference of the auction market preferred shares have committed to vote in favor of the transactions, and have also committed to tender 80% of the aggregate liquidation preference of the outstanding preferred shares. Given that Ambac Financial owns all common shares of Ambac Assurance, sufficient support for the transactions is already assured.

Consummation of the offer is dependent on an aggregate of 80% participation by liquidation preference outstanding of the preferred shares outstanding, along with approval at the special meeting, receipt of a satisfactory tax opinion and approval from the Wisconsin Office of the Commissioner of Insurance.

Moelis & Co. and Odeon Capital Group LLC are acting as co-dealer managers for the exchange offer.