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Collateralized Debt Obligations
 

Collateralized Debt Obligations

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    Collateralized Debt Obligations Collateralized Debt Obligations Document Transcript

    • Collateralized Debt Obligations Index (Click on title to advance to that section) A. Overview of Ambac’s participation B. Glossary of terms C. Break out of CDOs of ABS >25% MBS Exposure D. Other CDO Commitments A. Overview of Ambac’s participation Ambac underwrote Collateralized Debt Obligation (quot;CDOquot;) from 1998 - mid 2007. In March 2008 Ambac has announced that it has discontinued underwriting CDO exposures. The majority of CDO exposure has been executed through credit default swap agreements. Ambac's current outstanding CDO exposures are comprised of the following asset types and credit ratings: Ambac Collateralized Debt Obligations Exposure(1)(2) Total = $62.7 billion Business Mix by Net Par Ambac Ratings by Net Par As of June 30, 2008 As of June 30, 2008(3) ABS >25% MBS Other $27.4 bn AAA $2.3 bn 43% $26.9 bn 4% 43% Pooled ABS BIG(4) <25% MBS $15.4 bn AA $3.1 bn 24% $13.0 bn $ b $23.8 bn 5% 21% 38% Investment HY Yield Grade BBB $2.9 bn Market Value $6.3 bn A CDOs $1.1 bn 5% 10% $3.2 bn 2% 5% (1) Amounts exclude an outstanding commitment with respect to approximately $2.9 billion of ABS CDOs. This commitment is disclosed in further detail in Section D herein and in Ambac’s March 31, 2008 Form 10-Q filed with the Securities and Exchange Commission. (2) Amounts exclude a private AA-Bespoke CDO squared transaction of $1.4 billion net par which was terminated effective August 1, 2008. (3) Internal Ambac credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. In cases where Ambac has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac ratings set forth above reflect the internal Ambac ratings as of June 30, 2008, and may be changed at any time based on our internal credit review. Ambac undertakes no obligation to update such ratings more frequently than as of the end of each quarter. This does not constitute investment advice. Ambac or one of its affiliates, has insured the obligations listed and may also provide other products or services to the issuers of these obligations for which Ambac may have received premiums or fees. (4) “BIG” represents Ambac ratings below BBB-. 1
    • B. Glossary of terms The following are terms commonly used in the CDO markets: “High-grade CDO of ABS” or “ “ h d f ” ” h ll d f d l “ABS CDO-HG” - Transactions that are typically comprised of underlying RMBS collateral generally rated single-A through triple-A by one or more of the major rating agencies at the inception of the CDO. High-grade transactions contain a mix of sub-prime, mid-prime and prime mortgages. High-grade deals may contain components of other high-grade and mezzanine CDO exposure. These CDO components would also generally have single A through triple-A ratings. Section C, below, breaks out the various components of the high-grade transactions. “Mezzanine CDO of ABS” or “ABS CDO-MZ“ - Transactions that are structured similarly to high-grade transactions. transactions The primary difference is that the underlying collateral exposure in a mezzanine transaction is comprised primarily of triple-B rated tranches of sub-prime and mid-prime mortgages. Typically, mezzanine transactions require a more significant level of subordination to achieve triple-A credit ratings because of the lower credit quality of the underlying collateral pool. “Sub-prime mortgage loans” – Sub-prime loans can be defined simply as loans that involve elevated credit risk. Whereas prime loans are typically made to borrowers who have a strong credit history and can demonstrate a capacity to repay their loans, sub-prime loans are typically made to borrowers who are perceived as deficient on either or both of these grounds. Compared with prime loans, sub-prime loans typically have higher loan-to-value ratios, reflecting the greater difficulty that sub-prime borrowers have in making down payments and the propensity of these borrowers to extract equity during refinancing. (return to top) 2
    • C. Breakout of CDO of ABS >25% MBS Exposure(1)(2) Breakout of underlying Collateral Ratings as % of Deal can be viewed by clicking on column header (3) Collateral as % of Deal (1)(2) Amount Year (as of 6/30/2008) Sub-prime Other ABS CDO ABS CDO CDO Other Ambac Original (4) (5) (6) (6) (7) (8) Issued CDO of ABS ($ millions) RMBS RMBS High-grade Mezzanine Other ABS Rating Subordination 2004 Cheyne High Grade ABS CDO, Ltd. $ 739 36% 14% 11% 11% 25% 4% AA+ 22% 2005 Duke Funding High Grade III Ltd. 1,487 40% 60% - - <1% <1% BBB+ 17% 2005 Palmer Square PLC 986 31% 33% 7% 6% 19% 4% AA+ 21% 2005 Hereford Street ABS CDO I, Ltd. 986 46% 28% - - 22% 4% AA+ 17% 2005 Pascal CDO, Ltd. P l CDO Ltd 864 59% 17% 3% 5% 7% 10% AAA 14% 2005 Tremonia CDO 2005-1 PLC 810 42% 28% 2% 10% 13% 5% AAA 18% 2005 High Grade Structured Credit CDO 2005-1 Ltd 621 57% 31% 3% 5% 3% 2% AA+ 17% 2005 Belle Haven ABS CDO 2005-1, Ltd. 505 56% 29% 5% 4% 3% 4% BBB 22% 2006 Diversey Harbor ABS CDO, Ltd. 1,835 36% 39% 7% 17% <1% <1% BIG 23% 2006 Belle Haven ABS CDO 2006-1, Ltd. 1,642 52% 30% 3% 2% 5% 8% BIG 15% 2006 Ridgeway Court Funding I, Ltd. 1,534 36% 26% 9% 23% 5% 1% BBB- 20% 2006 Duke Funding High Grade IV, Ltd. 1,294 31% 69% - - - - BIG 13% 2006 Duke Funding High Grade V, Ltd. 1,242 38% 62% - - - - BIG 16% 2006 McKinley Funding III, Ltd. 1,151 18% 40% 7% 32% 3% - BIG 19% 2006 Millerton II High Grade ABS CDO, Ltd. 1,086 38% 54% 3% 2% 4% - BIG 14% 2006 Lancer Funding, Ltd. 927 48% 40% 3% 6% 3% <1% BBB+ 20% 2006 Cairn High Grade ABS CDO II Limited 815 34% 41% <1% 21% 1% 2% BIG 18% 2006 ESP Funding I, Ltd. 710 38% 21% - 16% 25% - A+ 28% 2006 Longshore CDO Funding 2006-1, Ltd. 604 30% 31% 8% 11% 17% 3% BIG 17% 2007 Kleros Preferred Funding VI, Ltd. 2,378 34% 36% 8% 18% 2% 1% BIG 20% 2007 Ridgeway Court Funding II, Ltd. 1,942 48% 10% 6% 28% 2% 7% BIG 35% 2007 Citation High Grade ABS CDO I, Ltd. 926 40% 53% - 6% - 2% BIG 15% 2007 Fiorente Funding Limited 721 36% 43% 3% 11% 1% 7% BBB- 15% 2007 Adams Square Funding II, Ltd. 495 85% 7% - 4% - 4% BIG 49% Subtotal 26,298 CDO of CDO 2005 Class V Funding 73 9% <1% 20% 32% 39% - BBB- 50% 2007 888 Tactical Fund, Ltd. 497 - - 13% 87% - - BIG 48% 2007 Class V Funding III, Ltd. 495 - - - 100% - - BIG 48% Subtotal 1,064 Total: $ 27,362 (1) ( ) g Amounts exclude an outstanding commitment with respect to approximately $2.9 billion of ABS CDOs. This commitment is disclosed in further p pp y detail in Section D herein and in Ambac’s March 31, 2008 Form 10-Q filed with the Securities and Exchange Commission. (2) Private AA-Bespoke CDO squared transaction of $1.4 billion net par was terminated effective August 1, 2008, and is excluded from this table. (3) May not total 100% due to rounding. (4) “Subprime” - Generally, transactions were categorized as sub-prime if they had a weighted-average credit score of 640 or lower as set forth in a third party data source we deemed reliable. If no credit score was available, transactions were categorized as sub-prime unless a reliable third party source, such as a rating agency, categorized the transaction as prime or mid-prime. (5) “Other RMBS” – Generally, transactions were categorized as Other RMBS if they were RMBS transactions with a weighted-average credit score greater than 640 as set forth in a third party data source we deemed reliable. If no credit score was available, transactions were categorized as Other RMBS if a reliable third party source, such as a rating agency, categorized the transaction as prime or mid-prime. (6) “CDO Other” and “Other ABS” – Generally, transactions were categorized as either “CDO Other” or “Other ABS” if they are not ABS CDO-HG, ABS CDO MZ Subprime or O h RMBS as d CDO-MZ, S b i Other described above. E ib d b l Examples of types of transactions included in the CDO O h category i l d b are not f f i i l d di h Other include, but limited to; CDOs primarily backed by commercial MBS or corporate securities, and collateralized loan obligations. Examples of transactions included in the Other ABS category, include, but are not limited to, transactions backed by commercial MBS, student loans, automobile loans, credit card receivables and student loans. (7) Ratings are as of June 30, 2008, and may be changed at any time based on our internal credit review. Ambac undertakes no obligation to update such ratings more frequently than as of the end of each quarter. (8) Original subordination means, with respect to each CDO of ABS, the total subordination below Ambac as of the related issuance date. (return to top) 3
    • Ratings of Sub-prime RMBS Collateral(1)(2) as of July 8, 2008(3) Amount Year (as of 6/30/2008) Issued CDO of ABS ($ millions) AAA AA A BBB BIG Subtotal(4) 1 2004 Cheyne High Grade ABS CDO, Ltd. $ 739 3% 21% 7% 3% 1% 36% 2 2005 Duke Funding High Grade III Ltd. 1,487 2% 8% 15% 6% 9% 40% 3 2005 Palmer Square PLC 986 10% 18% 2% - 2% 31% 4 2005 Hereford Street ABS CDO I, Ltd. 986 10% 8% 17% 7% 4% 46% 5 2005 Pascal CDO, Ltd. 864 5% 24% 13% 9% 8% 59% 6 2005 Tremonia CDO 2005-1 PLC 810 1% 17% 16% 5% 3% 42% 7 2005 High Grade Structured Credit CDO 2005-1 Ltd 621 4% 17% 23% 10% 3% 57% 8 2005 Belle Haven ABS CDO 2005-1, Ltd. 505 - <1% 6% 24% 24% 56% 9 2006 Diversey Harbor ABS CDO, Ltd. 1,835 2% 11% 7% 1% 14% 36% 10 2006 Belle H B ll Haven ABS CDO 2006 1 Ltd 2006-1, Ltd. 1 642 1,642 <1% 1% 22% 13% 3% 13% 52% 11 2006 Ridgeway Court Funding I, Ltd. 1,534 - 12% 6% 4% 14% 36% 12 2006 Duke Funding High Grade IV, Ltd. 1,294 <1% 3% 9% 10% 10% 31% 13 2006 Duke Funding High Grade V, Ltd. 1,242 - 2% 10% 5% 21% 38% 14 2006 McKinley Funding III, Ltd. 1,151 - 3% 3% <1% 11% 18% 15 2006 Millerton II High Grade ABS CDO, Ltd. 1,086 3% 14% 6% 6% 8% 38% 16 2006 Lancer Funding, Ltd. 927 <1% 22% 10% 6% 9% 48% 17 2006 Cairn High Grade ABS CDO II Limited 815 - 8% 6% 3% 18% 34% 18 2006 ESP Funding I, Ltd. 710 3% 6% 7% 3% 20% 38% 19 2006 Longshore CDO Funding 2006-1, Ltd. g g , 604 <1% 12% 9% 3% 5% 30% 20 2007 Kleros Preferred Funding VI, Ltd. 2,378 <1% 1% 3% <1% 30% 34% 21 2007 Ridgeway Court Funding II, Ltd. 1,942 - 9% 6% 4% 29% 48% 22 2007 Citation High Grade ABS CDO I, Ltd. 926 3% 10% 5% 1% 21% 40% 23 2007 Fiorente Funding Limited 721 <1% 12% 2% 4% 17% 36% 24 2007 Adams Square Funding II, Ltd. 495 - - - 1% 84% 85% Subtotal 26,298 CDO of CDO 2005 Class V Funding 73 - - - 6% 4% 9% 2007 888 Tactical F d Ltd T ti l Fund, Ltd. 497 - - - - - - 2007 Class V Funding III, Ltd. 495 - - - - - - Subtotal 1,064 Total: $ 27,362 (1) “Subprime” - Generally, transactions were categorized as sub-prime if they had a weighted-average credit score of 640 or lower as set forth in a third party data source we deemed reliable If no credit score was available transactions were categorized as sub-prime reliable. available, sub prime unless a reliable third party source, such as a rating agency, categorized the transaction as prime or mid-prime. (2) Generally, the ratings buckets for the underlying collateral comprising Ambac’s ABS CDOs were based on the lower of the publicly available ratings from Moody’s Investors Service and Standard and Poor’s available as of the date specified above. If no publicly available rating was available from any of Moody’s or S&P, the lowest of the ratings set forth in the latest trustee report for the related quarter was used. (3) The ratings set forth above are as of the date specified, and may be changed at any time by the rating agencies. Ambac undertakes no obligation to update such ratings. (4) Percentages may not add to subtotal due to rounding. (return to table) 4
    • Ratings of Other RMBS Collateral (1)(2) as of July 8, 2008(3) Amount Year (as of 6/30/2008) Issued CDO of ABS ($ millions) ) AAA AA A BBB BIG Subtotal(4) 1 2004 Cheyne High Grade ABS CDO, Ltd. $ 739 4% 7% 2% <1% <1% 14% 2 2005 Duke Funding High Grade III Ltd. 1,487 2% 20% 24% 7% 6% 60% 3 2005 Palmer Square PLC 986 13% 19% <1% - - 33% 4 2005 Hereford Street ABS CDO I, Ltd. 986 1% 9% 11% 3% 4% 28% 5 2005 Pascal CDO, Ltd. 864 3% 10% 3% - 1% 17% 6 2005 Tremonia CDO 2005-1 PLC 810 8% 7% 8% 3% 2% 28% 7 2005 High Grade Structured Credit CDO 2005-1 Ltd 621 4% 11% 13% 2% <1% 31% 8 2005 Belle Haven ABS CDO 2005-1, Ltd. 505 2% <1% 7% 6% 14% 29% 9 2006 Diversey Harbor ABS CDO, Ltd. 1,835 20% 7% 3% 2% 8% 39% 10 2006 Belle Haven ABS CDO 2006 1 Ltd Ha en 2006-1, Ltd. 1,642 1 642 8% 9% 3% 1% 9% 30% 11 2006 Ridgeway Court Funding I, Ltd. 1,534 16% 5% 2% <1% 4% 26% 12 2006 Duke Funding High Grade IV, Ltd. 1,294 <1% 11% 20% 14% 24% 69% 13 2006 Duke Funding High Grade V, Ltd. 1,242 - 6% 16% 7% 33% 62% 14 2006 McKinley Funding III, Ltd. 1,151 18% 6% 2% 2% 12% 40% 15 2006 Millerton II High Grade ABS CDO, Ltd. 1,086 20% 19% 9% 3% 3% 54% 16 2006 Lancer Funding, Ltd. 927 10% 14% 7% 3% 6% 40% 17 2006 Cairn High Grade ABS CDO II Limited 815 3% 9% 4% 6% 19% 41% 18 2006 ESP Funding I, Ltd. 710 9% 4% 1% 1% 6% 21% 19 2006 Longshore CDO Funding 2006-1, Ltd. 604 10% 4% 8% 2% 8% 31% 20 2007 Kleros Preferred Funding VI, Ltd. 2,378 20% 4% 1% <1% 11% 36% 21 2007 Ridgeway Court Funding II, Ltd. 1,942 3% 2% <1% <1% 5% 10% 22 2007 Citation High Grade ABS CDO I, Ltd. 926 25% 4% 2% 4% 18% 53% 23 2007 Fiorente Funding Limited 721 27% <1% <1% 2% 14% 43% 24 2007 Adams Square Funding II, Ltd. 495 - - - <1% 7% 7% Subtotal 26,298 CDO of CDO 2005 Class V Funding 73 - - - <1% - <1% 2007 888 Tactical Fund Ltd Fund, Ltd. 497 - - - - - - 2007 Class V Funding III, Ltd. 495 - - - - - - Subtotal 1,064 Total: $ 27,362 (1) “Other RMBS” – Generally, transactions were categorized as Other RMBS if they were RMBS transactions with a weighted-average credit score greater than 640 as set forth in a third party data source we deemed reliable. If no credit score was available, transactions were g p y , categorized as Other RMBS if a reliable third party source, such as a rating agency, categorized the transaction as prime or mid-prime (2) Generally, the ratings buckets for the underlying collateral comprising Ambac’s ABS CDOs were based on the lower of the publicly available ratings from Moody’s Investors Service and Standard and Poor’s available as of the date specified above. If no publicly available rating was available from any of Moody’s or S&P, the lowest of the ratings set forth in the latest trustee report for the related quarter was used. (3) The ratings set forth above are as of the date specified, and may be changed at any time by the rating agencies. Ambac undertakes no obligation to update such ratings (4) Percentages may not add to subtotal d to rounding. dd b l due d (return to table) 5
    • Ratings of ABS CDO-HG Collateral(1) as of July 8, 2008(2) Amount Year (as of 6/30/2008) Issued CDO of ABS ($ millions) AAA AA A BBB BIG Subtotal(3) 1 2004 Cheyne High Grade ABS CDO, Ltd. $ 739 5% 3% 1% - 2% 11% 2 2005 Duke Funding High Grade III Ltd. 1,487 - - - - - - 3 2005 Palmer Square PLC 986 3% <1% <1% <1% 3% 7% 4 2005 Hereford Street ABS CDO I, Ltd. 986 - - - - - - 5 2005 Pascal CDO, Ltd. 864 <1% 1% - - 1% 3% 6 2005 Tremonia CDO 2005-1 PLC 810 - - <1% 1% - 2% 7 2005 High Grade Structured Credit CDO 2005-1 Ltd 621 - - 2% - 1% 3% 8 2005 Belle Haven ABS CDO 2005-1, Ltd. 505 - 2% - 2% 1% 5% 9 2006 Diversey Harbor ABS CDO, Ltd. 1,835 <1% <1% <1% - 6% 7% 10 2006 Belle Haven ABS CDO 2006-1, Ltd. 1,642 - 1% - <1% 1% 3% 11 2006 Ridgeway Court Funding I, Ltd. 1,534 <1% - - - 8% 9% 12 2006 Duke Funding High Grade IV, Ltd. 1,294 - - - - - - 13 2006 Duke Funding High Grade V, Ltd. 1,242 - - - - - - 14 2006 McKinley Funding III, Ltd. 1,151 - - - - 7% 7% 15 2006 Millerton II High Grade ABS CDO, Ltd. 1,086 - <1% - - 2% 3% 16 2006 Lancer Funding, Ltd. 927 - 1% 1% - <1% 3% 17 2006 Cairn High Grade ABS CDO II Limited 815 - - - - <1% <1% 18 2006 ESP Funding I, Ltd. 710 - - - - - - 19 2006 L Longshore CDO Funding 2006 1 Ltd h F di 2006-1, Ltd. 604 3% 3% - 1% 1% 8% 20 2007 Kleros Preferred Funding VI, Ltd. 2,378 - <1% - - 7% 8% 21 2007 Ridgeway Court Funding II, Ltd. 1,942 <1% <1% - <1% 4% 6% 22 2007 Citation High Grade ABS CDO I, Ltd. 926 - - - - - - 23 2007 Fiorente Funding Limited 721 - - - - 3% 3% 24 2007 Adams Square Funding II, Ltd. 495 - - - - - - Subtotal 26,298 CDO of CDO 2005 Class V Funding 73 - - - 2% 18% 20% 2007 888 Tactical Fund, Ltd. 497 - - - - 13% 13% 2007 Class V Funding III, Ltd. 495 - - - - - - Subtotal 1,064 Total: $ 27,362 (1) Generally, the ratings buckets for the underlying collateral comprising Ambac’s ABS CDOs were based on the lower of the publicly available ratings from Moody’s Investors Service and Standard and Poor’s available as of the date specified above. If no publicly available rating was available from any of Moody’s or S&P, the lowest of the ratings set forth in the latest trustee report for the related quarter was used. (2) The ratings set forth above are as of the date specified, and may be changed at any time by the rating agencies. Ambac undertakes no obligation to update such ratings. (3) Percentages may not add to subtotal due to rounding. (return to table) 6
    • Ratings of ABS CDO-MZ Collateral(1) as of July 8, 2008(2) Amount Year (as of 6/30/2008) Issued CDO of ABS ($ millions) AAA AA A BBB BIG Subtotal(3) 1 2004 Cheyne High Grade ABS CDO, Ltd. $ 739 1% <1% 1% - 8% 11% 2 2005 Duke Funding High Grade III Ltd. 1,487 - - - - - - 3 2005 Palmer Square PLC 986 - <1% 2% 1% 3% 6% 4 2005 Hereford Street ABS CDO I, Ltd. 986 - - - - - - 5 2005 Pascal CDO, Ltd. 864 - <1% 2% - 3% 5% 6 2005 Tremonia CDO 2005-1 PLC 810 - 1% 3% 1% 5% 10% 7 2005 High Grade Structured Credit CDO 2005-1 Ltd 621 <1% 2% 1% <1% <1% 5% 8 2005 Belle Haven ABS CDO 2005-1, Ltd. 505 - <1% 3% - 1% 4% 9 2006 Diversey Harbor ABS CDO, Ltd. 1,835 - <1% 2% <1% 14% 17% 10 2006 Belle Haven ABS CDO 2006-1, Ltd. 1,642 - <1% - 1% 1% 2% 11 2006 Ridgeway Court Funding I, Ltd. 1,534 <1% <1% <1% 2% 19% 23% 12 2006 Duke Funding High Grade IV, Ltd. 1,294 - - - - - - 13 2006 Duke Funding High Grade V, Ltd. 1,242 - - - - - - 14 2006 McKinley Funding III, Ltd. 1,151 - 2% 6% 2% 23% 32% 15 2006 Millerton II High Grade ABS CDO, Ltd. 1,086 - <1% 1% - <1% 2% 16 2006 Lancer Funding, Ltd. 927 <1% 1% 1% - 4% 6% 17 2006 Cairn High Grade ABS CDO II Limited 815 - <1% <1% <1% 20% 21% 18 2006 ESP Funding I, Ltd. 710 1% 2% <1% 1% 12% 16% 19 2006 L Longshore CDO Funding 2006 1 Ltd h F di 2006-1, Ltd. 604 - 4% 1% - 5% 11% 20 2007 Kleros Preferred Funding VI, Ltd. 2,378 - - - - 18% 18% 21 2007 Ridgeway Court Funding II, Ltd. 1,942 - <1% <1% 1% 26% 28% 22 2007 Citation High Grade ABS CDO I, Ltd. 926 - - - - 6% 6% 23 2007 Fiorente Funding Limited 721 <1% - <1% <1% 10% 11% 24 2007 Adams Square Funding II, Ltd. 495 - - - 1% 3% 4% Subtotal 26,298 CDO of CDO 2005 Class V Funding 73 - - - 6% 26% 32% 2007 888 Tactical Fund, Ltd. 497 - - - - 87% 87% 2007 Class V Funding III, Ltd. 495 - - - 4% 96% 100% Subtotal 1,064 Total: $ 27,362 (1) Generally, the ratings buckets for the underlying collateral comprising Ambac’s ABS CDOs were based on the lower of the publicly available ratings from Moody’s Investors Service and Standard and Poor’s available as of the date specified above. If no publicly available rating was available from any of Moody’s or S&P, the lowest of the ratings set forth in the latest trustee report for the related quarter was used. (2) The ratings set forth above are as of the date specified, and may be changed at any time by the rating agencies. Ambac undertakes no obligation to update such ratings. (3) Percentages may not add to subtotal due to rounding. (return to table) 7
    • Ratings of CDO-Other Collateral (1)(2) as of July 8, 2008(3) Amount Year (as of 6/30/2008) Issued CDO of ABS ($ millions) AAA AA A BBB BIG Subtotal(4) 1 2004 Cheyne High Grade ABS CDO, Ltd. $ 739 12% 12% 2% - - 25% 2 2005 Duke Funding High Grade III Ltd. 1,487 <1% - - - - <1% 3 2005 Palmer Square PLC 986 10% 5% <1% - 4% 19% 4 2005 Hereford Street ABS CDO I, Ltd. 986 3% 8% 9% 1% 1% 22% 5 2005 Pascal CDO, Ltd. 864 <1% 6% - - - 7% 6 2005 Tremonia CDO 2005-1 PLC 810 2% 4% 3% 2% 3% 13% 7 2005 High Grade Structured Credit CDO 2005-1 Ltd 621 1% 2% - - - 3% 8 2005 Belle Haven ABS CDO 2005-1, Ltd. 505 - <1% <1% 2% - 3% 9 2006 Diversey Harbor ABS CDO, Ltd. 1,835 - <1% - - - <1% 10 2006 Belle Haven ABS CDO 2006-1, Ltd. 1,642 1% <1% 3% - - 5% 11 2006 Ridgeway Court Funding I, Ltd. 1,534 <1% 3% - - <1% 5% 12 2006 Duke Funding High Grade IV, Ltd. 1,294 - - - - - - 13 2006 Duke Funding High Grade V, Ltd. 1,242 - - - - - - 14 2006 McKinley Funding III, Ltd. 1,151 <1% 2% - - 1% 3% 15 2006 Millerton II High Grade ABS CDO, Ltd. 1,086 <1% <1% 2% - - 4% 16 2006 Lancer Funding, Ltd. 927 2% 1% - - - 3% 17 2006 Cairn High Grade ABS CDO II Limited 815 - 1% - - - 1% 18 2006 ESP Funding I, Ltd. 710 3% 13% 8% - 1% 25% 19 2006 L Longshore CDO Funding 2006 1 Ltd h F di 2006-1, Ltd. 604 5% 6% 6% - <1% 1% 17% 20 2007 Kleros Preferred Funding VI, Ltd. 2,378 - <1% <1% - 1% 2% 21 2007 Ridgeway Court Funding II, Ltd. 1,942 - 2% - - - 2% 22 2007 Citation High Grade ABS CDO I, Ltd. 926 - - - - - - 23 2007 Fiorente Funding Limited 721 - <1% - - <1% 1% 24 2007 Adams Square Funding II, Ltd. 495 - - - - - - Subtotal 26,298 CDO of CDO 2005 Class V Funding 73 - - - 32% 7% 39% 2007 888 Tactical Fund, Ltd. 497 - - - - - - 2007 Class V Funding III, Ltd. 495 - - - - - - Subtotal 1,064 Total: $ 27,362 (1) “CDO Other” and “Other ABS ” – Generally, transactions were categorized as either “CDO Other” or “Other ABS” if they are not ABS CDO-HG, ABS CDO-MZ, Subprime or Other RMBS as described above. Examples of types of transactions included in the CDO Other category include, but are not limited to; CDOs primarily backed by commercial MBS or corporate securities, and collateralized loan obligations. Examples of transactions included in the Other ABS category, include, but are not limited to, transactions backed by commercial MBS, student loans, automobile loans, credit card receivables and student loans. (2) Generally, the ratings buckets for the underlying collateral comprising Ambac’s ABS CDOs were based on the lower of the publicly available ratings from Moody’s Investors Service and Standard and Poor’s available as of the date specified above. If no publicly available rating was available from any of Moody’s or S&P, the lowest of the ratings set forth in the latest trustee report for the related quarter was used. (3) The ratings set forth above are as of the date specified, and may be changed at any time by the rating agencies. Ambac undertakes no obligation to update such ratings. (4) Percentages may not add to subtotal due to rounding. (return to table) 8
    • Ratings of ABS-Other Collateral (1)(2) as of July 8, 2008(3) Amount Year (as of 6/30/2008) Issued CDO of ABS ($ millions) AAA AA A BBB BIG Subtotal(4) 1 2004 Cheyne High Grade ABS CDO, Ltd. $ 739 2% 1% <1% - - 4% 2 2005 Duke Funding High Grade III Ltd. 1,487 - <1% <1% - - <1% 3 2005 Palmer Square PLC 986 3% <1% - - - 4% 4 2005 Hereford Street ABS CDO I, Ltd. 986 - 3% 1% - - 4% 5 2005 Pascal CDO, Ltd. 864 4% 5% <1% - - 10% 6 2005 Tremonia CDO 2005-1 PLC 810 2% 2% 1% - - 5% 7 2005 High Grade Structured Credit CDO 2005-1 Ltd 621 2% - - - - 2% 8 2005 Belle Haven ABS CDO 2005-1, Ltd. 505 - - 2% 2% <1% 4% 9 2006 Diversey Harbor ABS CDO, Ltd. 1,835 - <1% <1% - - <1% 10 2006 Belle Haven ABS CDO 2006-1, Ltd. 1,642 1% 3% 3% - - 8% 11 2006 Ridgeway Court Funding I, Ltd. 1,534 - <1% <1% - - 1% 12 2006 Duke Funding High Grade IV, Ltd. 1,294 - - - - - - 13 2006 Duke Funding High Grade V, Ltd. 1,242 - - - - - - 14 2006 McKinley Funding III, Ltd. 1,151 - - - - - - 15 2006 Millerton II High Grade ABS CDO, Ltd. 1,086 - - - - - - 16 2006 Lancer Funding, Ltd. 927 - - <1% - - <1% 17 2006 Cairn High Grade ABS CDO II Limited 815 - - 2% - - 2% 18 2006 ESP Funding I, Ltd. 710 - - - - - - 19 2006 h F di 2006-1, Ltd. Longshore CDO Funding 2006 1 Ltd L 604 <1% 1% <1% 1% 2% - - 3% 20 2007 Kleros Preferred Funding VI, Ltd. 2,378 1% - <1% - - 1% 21 2007 Ridgeway Court Funding II, Ltd. 1,942 - 5% 1% - - 7% 22 2007 Citation High Grade ABS CDO I, Ltd. 926 - 1% <1% - - 2% 23 2007 Fiorente Funding Limited 721 <1% <1% 5% - - 7% 24 2007 Adams Square Funding II, Ltd. 495 - 1% 1% 1% 1% 4% Subtotal 26,298 CDO of CDO 2005 Class V Funding 73 - - - - - - 2007 888 Tactical Fund, Ltd. 497 - - - - - - 2007 Class V Funding III, Ltd. 495 - - - - - - Subtotal 1,064 Total: $ 27,362 (1) “CDO Other” and “Other ABS ” – Generally, transactions were categorized as either “CDO Other” or “Other ABS” if they are not ABS CDO-HG, ABS CDO-MZ, Subprime or Other RMBS as described above. Examples of types of transactions included in the CDO Other category include, but are not limited to; CDOs primarily backed by commercial MBS or corporate securities, and collateralized loan obligations. E bli i l f i Examples of transactions included i the O h ABS category, i l d b are not li i d to, transactions b k d b i l d d in h Other include, but limited i backed by commercial MBS, student loans, automobile loans, credit card receivables and student loans. (2) Generally, the ratings buckets for the underlying collateral comprising Ambac’s ABS CDOs were based on the lower of the publicly available ratings from Moody’s Investors Service and Standard and Poor’s available as of the date specified above. If no publicly available rating was available from any of Moody’s or S&P, the lowest of the ratings set forth in the latest trustee report for the related quarter was used. (3) The ratings set forth above are as of the date specified, and may be changed at any time by the rating agencies. Ambac undertakes no obligation to update such ratings. (4) Percentages may not add to subtotal due to rounding. (return to table) 9
    • D. Other CDO Commitments Ambac has an outstanding commitment to provide a financial guarantee on a static pool of CDO iti i il i ti g f b i d id i id ti l tg g backed iti ti securities, primarily consisting of sub prime and mid prime residential mortgage b k d securitizations. The commitment was structured such that Ambac would issue an insurance policy on investment securities remaining in the pool after a first loss coverage amount was depleted. The initial pool size was approximately $4 billion with 25% of first loss coverage. As of June 30, 2008, the gross investment pool balance is approximately $3.8 billion with $910 million of remaining first loss. We expect the gross investment pool balance and the first loss amount to be reduced by losses associated with credit events that have occurred and are subject to cash settlement. Ambac’s approximate net exposure under this commitment as of June 30, 2008 is $2.9 billion. Ambac has a BIG internal credit rating for this commitment.( ) commitment (1) The following summarizes certain key characteristics of the underlying investment securities as of June 30, 2008: CDO vintage by closing date(2): g y g 2007 …………………………………………………………… 2.3% 2006 …………………………………………………………… 13.5% 2005 …………………………………………………………… 36.8% 2004 and prior …………………………………………. 47.4% Ratings distribution(3) Moody’s S&P (as of June 30, 2008) Aaa/AAA 12.3% 18.7% Aa/AA 14.2% 21.4% A/A 8.9% 12.6% Baa/BBB 11.7% 13.2% BIG 52.9% 25.7% Not rated 0.0% 8.4% (1) As of June 30, 2008 and may be changed at any time based on our internal credit review. Ambac undertakes no obligation to update such ratings more frequently than as of the end of each quarter. (2) The closing dates set forth above were determined based on third party sources we deemed reliable. (3) The third party ratings set forth above are as of the date specified, and may be changed at any time by the rating agencies. Ambac undertakes no obligation to update such ratings. (return to top) 10