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Canyon Capital announces proxy contest for its nominee's election to replace Ambac's board chairman

Canyon CapitalAdvisors LLC on April 8 filed preliminary proxy materials in supportof its proposal to elect FrederickArnold to the board of AmbacFinancial Group Inc. to replace Jeffrey Stein, chairman of the board,at Ambac's annual meeting of stockholders.

Canyon said it nominated Arnold, CFO of ConvergEx Group LLC,as an independent director to replace Stein because it realizes that asking stockholdersto remove Nader Tavakoli from the board while he continues to serve as presidentand CEO of Ambac would create complications. The company said an independent boardwith at least two independent directors proposed by stockholders will make the rightdecision regarding Tavakoli's tenure at Ambac.

Canyon said it supports the agreement between Ambac and a number of stockholders to replacetwo of Ambac's directors with Ian Haft, proposed by the stockholders, and DavidHerzog, proposed by the board of Ambac. However, Canyon said it is skeptical thatchange will be possible given that the board contains only one director nominatedby stockholders and continues to be chaired by Stein, who has presided over theboard's appointment of Tavakoli and throughout the deterioration of the company'sstock price.

Ambac criticizedthe concerns expressedby Canyon because it is conflicted by virtue of its holdings in policies issuedby Ambac's wholly owned subsidiary AmbacAssurance Corp., Canyon said. The company said the stockholder concernsthat led to the support agreements and the appointment of two new directors confirmthat the ongoing issues raised by it are of concern to all stockholders.

With the election of Arnold, Ambac's board would be more fairlybalanced, having three new directors nominated with the support of stockholdersholding a substantial portion of Ambac's equity and three previously serving directors,Canyon said.