Syncora Guarantee Executes Agreement With Counterparties to Restructure Its Entire Credit Default Swap Portfolio

NEW YORK - On May 28, 2009, Syncora Guarantee Inc. (”Syncora Guarantee”) executed a master transaction agreement (the “2009 MTA”) with all 25 of the financial institutions that are counterparties (the “Counterparties”) to its credit default swap (”CDS”) transactions and certain financial guarantee insurance policies to restructure certain of its obligations.

Set forth in this press release is a summary of the terms of the 2009 MTA, as well as Syncora Guarantee’s pro forma financial position in accordance with statutory accounting principles, as prescribed and permitted in the State of New York (”SAP”), as of March 31, 2009, as if Syncora Guarantee had consummated (i) the 2009 MTA and related agreements and (ii) the offer to acquire 56 different classes of residential mortgage backed securities (”RMBS”) insured by Syncora Guarantee by the BCP Voyager Master Funds SPC, Ltd., acting on behalf of and for the account of the Distressed Opportunities Master Segregated Portfolio pursuant to an RMBS transaction agreement (the “RMBS Transaction Agreement”) at a level that would achieve 72 remediation points as described in the offer.

The New York Insurance Department (the “NYID”) has ordered that, by no later than May 29, 2009, without limiting the NYID’s power to institute rehabilitation or liquidation at an earlier date, Syncora Guarantee take such steps as may be necessary to remove the impairment of its capital and return to compliance with its regulatory required minimum surplus to policyholders. Syncora Guarantee must close the transactions contemplated by each of the 2009 MTA and related agreements and the RMBS Transaction Agreement in order to comply with this order.

The 2009 MTA and Related Agreements

On May 28, 2009, Syncora Guarantee and all 25 Counterparties executed the 2009 MTA, which effectively commutes or restructures 100% of Syncora Guarantee’s US$56 billion of CDS exposure. The 2009 MTA provides for the effective commutation of Syncora Guarantee’s financial guarantees of CDS relating to collateralized debt obligations of asset-backed securities (”ABS CDOs”) with an aggregate par approximating US$15 billion and case basis loss reserves in accordance with SAP approximating US$4.6 billion. This represents 100% of Syncora Guarantee’s CDS exposure for which Syncora Guarantee has reserves or expects losses respecting ABS CDOs and substantially all of the company’s financial guarantee exposure to ABS CDOs with expected losses. Additionally, approximately US$40 billion of CDS exposure with no loss reserves will be novated to Syncora Capital Assurance Inc. (”Drop-Down Company”), a newly-formed, wholly-owned New York financial guarantee insurance subsidiary of Syncora Guarantee. Syncora Guarantee has agreed under limited circumstances to insure certain principal and interest claims relating to these novated CDS’s.

However, the 2009 MTA and related agreements remain subject to satisfaction or waiver of substantial closing conditions, including the successful consummation of the offer pursuant to the RMBS Transaction Agreement, which includes the tender of eligible RMBS that in the aggregate total 72 remediation points. No assurance can be given that the 2009 MTA will be consummated. The transactions contemplated by the 2009 MTA and related agreements are described below.

The execution of the 2009 MTA by all 25 Counterparties allows Syncora Guarantee to use certain segregated funds (aggregating approximately US$853 million as of March 31, 2009) allocated for restructuring of counterparty obligations pursuant to the terms of the Master Commutation, Release and Restructuring Agreement, dated July 28, 2008, as amended, and related commutations and releases (the “2008 MTA”).

The terms of the 2009 MTA include:

(i) The Counterparties will effectively commute certain CDS and related financial guarantee policies in exchange for consideration consisting of (a) US$1.2 billion in cash, (b) the issuance of short term surplus notes of Syncora Guarantee in the aggregate principal amount of US$150 million, (c) the issuance of long term surplus notes of Syncora Guarantee in the aggregate principal amount of US$475 million, (d) the transfer to such Counterparties or their designees of the approximately 40% of the outstanding shares of the common stock of Syncora Holdings Ltd., the parent of Syncora Guarantee (”Syncora Holdings”), following the transaction and (e) certain additional consideration totaling approximately US$50 million;

(ii) Syncora Guarantee has formed Drop-Down Company to:

(a) reinsure on a cut-through basis certain of Syncora Guarantee’s public finance and selected global infrastructure business pursuant to a Quota Share Reinsurance Treaty between the Drop-Down Company and Syncora Guarantee; and

(b) novate from Syncora Guarantee substantially all financial guarantee insurance policies issued on CDS’s (which are not subject to commutations covered by the 2009 MTA) pursuant to an Assumption, Reinsurance and Novation Agreement, subject to the insurance of certain principal and interest claims by Syncora Guarantee under certain limited circumstances.

Syncora Guarantee will capitalize Drop-Down Company with cash and qualified investment securities in an amount of US$541.5 million in return for which Drop-Down Company will issue to Syncora Guarantee 100% of its common stock, a short-term surplus note in the principal amount of US$150 million and a long-term surplus note in the principal amount of US$200 million. Syncora Guarantee will provide an additional CDS and related financial guarantee insurance policy to each counterparty to a CDS contract that is novated to Drop-Down Company that insures principal and interest shortfalls on the reference obligations to the extent that Drop-Down Company is unable to pay the CDS counterparties amounts due under the existing contracts, subject to certain limitations and conditions; and

(iii) Syncora Guarantee and Drop-Down Company will agree not to write any new business, except in very limited circumstances. Each of Syncora Guarantee and Drop-Down Company will also agree to limitations on its ability to issue equity securities, make certain distributions, merge or consolidate, transfer or create liens, pay dividends and incur indebtedness, among other things.

The closing of the transactions contemplated by the 2009 MTA and related agreements is subject to certain conditions, including, among others, the satisfaction or waiver of all conditions, including, among others:

(i) the consummation of the offer pursuant to the RMBS Transaction Agreement, including the tender of eligible RMBS that in the aggregate total 72 remediation points;

(ii) the successful negotiation of commutations or other concessions from other third parties with respect to certain existing obligations of Syncora Guarantee;

(iii) the receipt of all required regulatory and non-regulatory approvals, including from the NYID; and

(iv) the issuance of a fairness opinion to the board of directors of Syncora Guarantee and a solvency opinion to the boards of directors of Syncora Guarantee and Drop-Down Company.

The terms of the 2009 MTA described above supersede the description thereof provided in Syncora Holdings’ Annual Report on Form 10-K, as amended, for the year ended December 31, 2008, its Current Report on Form 8-K filed on March 6, 2009 and Syncora Guarantee’s 2008 Annual Statement and its March 31, 2009 Quarterly Statement, each as filed with the NYID and available at www.syncora.com.

Information Regarding Syncora Guarantee’s Financial Position in the Event the 2009 MTA and Related Agreements and the RMBS Transaction Agreement ARE NOT Consummated

In the event that the transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement are not successfully consummated and Syncora Guarantee is placed into rehabilitation or liquidation by the NYID, Syncora Guarantee may be required to pay mark-to-market termination payments under its CDS contracts.

Substantially all of Syncora Guarantee’s CDS contracts provide for mark-to-market termination payments following the occurrence of events that are outside Syncora Guarantee’s control, such as Syncora Guarantee being placed into receivership or rehabilitation by the NYID or the NYID taking control of Syncora Guarantee or, in limited cases, Syncora Guarantee’s insolvency. Mark-to-market termination payments for deals in which Syncora Guarantee would have to pay a termination payment are generally calculated either based on “market quotation” or “loss” (each as defined in the ISDA Master Agreement). “Market quotation” is an amount based on quotations received from each of four leading dealers in the relevant market that would be paid to or by the counterparty in consideration of an agreement between that counterparty and each such dealer to enter into a replacement transaction that would have the effect of preserving for such counterparty the economic equivalent of any payment or delivery in respect of the terminated transaction that would have been required after termination of the CDS contract but for the early termination of such CDS contract. “Loss” is an amount that a counterparty reasonably determines in good faith to be its total losses and costs in connection with the CDS contract, including any loss of bargain, cost of funding or, at the election of such counterparty, but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position. There can be no assurance that counterparties to Syncora Guarantee’s CDS contracts, including the Counterparties, will not assert that events have occurred that require Syncora Guarantee to make mark-to-market termination payments.

In the event Syncora Guarantee is required to make mark-to-market termination payments, the aggregate termination payments that Syncora Guarantee would be required to pay could exceed US$15 billion, which would significantly exceed its ability to make such payments and, accordingly, such events would have a material adverse effect on Syncora Guarantee’s financial position and results of operations.

On April 10, 2009, the NYID, pursuant to Section 1310 of the New York Insurance Law, issued an order stating that, without limiting its power to institute rehabilitation or liquidation at an earlier date, Syncora Guarantee shall take such steps as may be necessary to remove the impairment of its capital and return to compliance with its regulatory required minimum surplus to policyholders by no later than May 29, 2009.

Additionally, as set forth in the order, Syncora Guarantee shall not write any new business and, as of April 26, 2009, Syncora Guarantee shall suspend payment of any and all claims and otherwise operate only in the ordinary course and as necessary to effectuate a restructuring. On April 27, 2009, pursuant to the aforementioned order, Syncora Guarantee announced that it had suspended the payment of all claims from and after April 26, 2009 and is operating only in the ordinary course and as necessary to complete a successful comprehensive restructuring.

The Board of Directors of Syncora Guarantee will continue to monitor the situation on a daily basis and, in the absence of a successful restructuring, may, in the exercise of its fiduciary duties, request the NYID to seek court appointment of a rehabilitator or liquidator of Syncora Guarantee.

Information Regarding Syncora Guarantee’s Financial Position in the Event the 2009 MTA and Related Agreements and the RMBS Transaction Agreement ARE Consummated

On a SAP basis, after giving effect to the transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement on a pro forma basis as if they had been consummated on March 31, 2009, Syncora Guarantee would have expected to report total policyholders’ surplus at March 31, 2009 in the range of US$100 million to US$200 million, as compared to a policyholders’ deficit (unaudited) of approximately US$3.8 billion reported at March 31, 2009 before giving effect to the transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement. In addition, at the effective date of the transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement, the policyholders’ surplus of Drop-Down Company, reflecting its initial capitalization, would be expected to be in the range of US$265 million to US$315 million.

Because of the current financial condition of Syncora Holdings and Syncora Guarantee and the regulatory consequences if Syncora Holdings and Syncora Guarantee do not successfully consummate the 2009 MTA and related agreements and the RMBS Transaction Agreement, Syncora Holdings’ management believes that Syncora Guarantee’s SAP basis financial information is the most meaningful financial information for evaluating Syncora Holdings’ historic financial position, as well as its financial position after giving effect to the transactions contemplated by the 2009 MTA and the related agreements and the RMBS Transaction Agreement. Accordingly, set forth in the table below is certain pro forma summary balance sheet financial information of Syncora Guarantee and Drop-Down Company, prepared in accordance with SAP, which gives effect to transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement as if they had been consummated on March 31, 2009. The pro forma adjustments in the table below reflect the mid-point of the aforementioned range of pro forma policyholders’ surplus discussed above. The notes following the table and the related pro forma assumptions discussed below should be read in conjunction with the pro forma financial information presented in the table below.

(All amounts in US dollars unless otherwise noted) DROP-DOWN As of March 31, 2009 SYNCORA GUARANTEE COMPANY ($ amounts in millions) Pro Pro Reported Adjustments Forma Forma ——– ———– —— —— Assets: Cash and Investments $3,224 $(903) (a) $557 $903 $(1,251) (b) $(375) (c) $(93) (d) $(45) (e) Investment in subsidiaries Drop-Down Company $- $292 (a) $292 Syncora Guarantee-UK $38 (f) $38 Other assets $185 $- $185 $- —- — —- — Total assets $3,410 $(2,338) $1,072 $903 ====== ======= ====== ==== Liabilities: Losses and loss adjustment expenses $6,177 $(4,581) (b) $466 $- (1,079) (c) (52) (d) Unearned premiums 723 (438) (a) 285 438 Mandatory contingency reserves 286 (173) (a) 110 173 (3) (b) (1) (c) Other liabilities 62 $- 62 $- — – — – Total liabilities $7,248 $(6,326) $922 $611 Policyholders’ (deficit) surplus (3,838) $- (a) 150 292 —— — — 3,333 (b) 705 (c) (41) (d) (45) (e) 38 (f) — Total liabilities and policyholders’ (deficit) surplus $3,410 $(2,338) $1,072 $903 (a) Represents the journal entries to record the initial capitalization of Drop-Down Company, as well as the reinsurance and novation of certain business from Syncora Guarantee to Drop-Down Company. For purposes of this pro forma presentation any surplus notes issued by Drop-Down Company to Syncora Guarantee in connection with such initial capitalization have been included in investment in subsidiaries in the table above. Also, Syncora Guarantee’s investment in subsidiaries is subject to limitations under New York State Insurance Law and the recognition of such investment as an admitted asset assumes the NYID’s approval to the extent it would otherwise be limited under the law. (b) Represents the journal entries to record the commutation, termination or amendment of certain of Syncora Guarantee’s CDS contracts and related financial guarantee insurance policies. (c) Represents the journal entries to record the in substance defeasement of RMBS tendered in connection with the RMBS Transaction Agreement assuming consummation of that Agreement achieves a level of 72 remediation points. These entries assume the NYID will grant Syncora Guarantee a permitted accounting practice to derecognize reserves for unpaid losses and loss adjustment expenses relating to such RMBS. (d) Represents certain additional commutations and concessions from third parties related to the 2009 MTA. (e) Represents the expected tax effect of the pro forma adjustments, assuming Syncora Guarantee does not obtain the permission it has requested from the Internal Revenue Service to change certain accounting policies. (f) Represents recognition as an admitted asset of Syncora Guarantee’s investment in its wholly owned subsidiary, Syncora Guarantee (U.K.) Limited assuming the NYID’s approval to the extent it would otherwise be limited under New York State Insurance Law. At March 31, 2009, the entire carrying value of this investment was not admitted by Syncora Guarantee because it exceeded the limits under New York State Insurance Law.

The amount of Syncora Guarantee’s and Drop-Down Company’s policyholders’ surplus and other financial information that would have been expected to be reported at March 31, 2009 after giving effect to transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement on a pro forma basis as if they had been consummated on March 31, 2009, reflect certain assumptions by Syncora Holdings concerning the transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement. These assumptions include, but are not limited to: (i) consummation of the 2009 MTA and related agreements, (ii) composition of and successful consummation of the tender for the minimum required amount of RMBS pursuant to the RMBS Transaction Agreement, (iii) NYID approval of various requests for exemptions from statutes and for permitted accounting practices that deviate from accounting practices prescribed by SAP, including requests to release reserves associated with RMBS acquired in the tender offer and other commuted policies and to permit Syncora Guarantee to reflect its investments in the Drop-Down Company and other insurance companies at the proportionate amount of capital and surplus of such companies owned by Syncora Guarantee, (iv) the successful negotiation of commutations or other concessions from third parties and (v) utilization of net operating loss carryforwards to offset income generated in connection with 2009 MTA and related transactions and the RMBS Transaction Agreement. There can be no assurance that the assumptions underlying the pro forma financial information herein will not differ materially from the ultimate treatment of such transactions and any differences may be material. There can be no assurance that, assuming the transactions contemplated by the 2009 MTA and related agreements and by the RMBS Transaction Agreement are consummated, the actual amounts of policyholders’ surplus and other financial information will not differ materially from that derived based on the aforementioned assumptions.

For a description of the risks if Syncora Guarantee should become subject to regulatory action or if Syncora Guarantee should become insolvent, see “Risk Factors” in Syncora Holdings’ Annual Report on Form 10-K, as amended, for the year ended December 31, 2008 and Syncora Guarantee’s March 31, 2009 Quarterly Statement as filed with the NYID.

Ability of Syncora Holdings and Syncora Guarantee to Continue as a Going Concern and Continuing Risks and Uncertainties

Syncora Holdings’ management has concluded that as of March 31, 2009 there was substantial doubt about the ability of Syncora Holdings to continue as a going concern. In connection with the filing of Syncora Guarantee’s SAP financial statements, Syncora Guarantee’s management has concluded that as of March 31, 2009 there was substantial doubt about the ability of Syncora Guarantee to continue as a going concern. The financial information discussed above, however, was prepared assuming that each of the companies continues as a going concern and does not include any adjustment that might result from their inability to continue as a going concern. For discussion of the risks and uncertainties that Syncora Holdings and Syncora Guarantee are exposed to, see Note 5 to the audited consolidated financial statements of Syncora Holdings included in its Annual Report on Form 10-K, as amended, for the year ended December 31, 2008, and Note 21 to Syncora Guarantee’s March 31, 2009 Quarterly Statement as filed with the NYID, which can be found on its website at www.syncora.com.

Syncora Holdings’ and Syncora Guarantee’s management will reassess the going-concern status of the respective companies upon the closing of the transactions contemplated by the 2009 MTA and the related agreements and the RMBS Transaction Agreement. The future going concern assessment of the management of Syncora Holdings and Syncora Guarantee will be based in large part on the reduction of ABS CDO and RMBS exposure and the mitigation of risk of adverse loss development pursuant to such agreements, its management’s assessment of the risk of additional adverse loss development on remaining in-force exposures and Syncora Guarantee’s compliance with its statutory minimum policyholders’ surplus requirement. While the transactions contemplated by the 2009 MTA and related agreements and the RMBS Transaction Agreement were designed to improve the financial condition of Syncora Guarantee, Syncora Guarantee will continue to be subject to risks and uncertainties that could materially adversely affect its financial position.

This press release does not constitute an offer to purchase any securities or a solicitation of an offer to sell any securities. The offers are being made only pursuant to an offer to purchase and related letter of transmittal and only to such persons and in such jurisdictions as is permitted under applicable law. This press release is hereby incorporated by reference into the Offer to Purchase, dated March 11, 2009, as amended or supplemented from time to time, that has been provided to holders of eligible RMBS pursuant to the RMBS Transaction Agreement.

About Syncora Guarantee Inc.

Syncora Guarantee Inc. is a wholly owned subsidiary of Syncora Holdings Ltd. Syncora Holdings Ltd. (OTC: SYCRF) is a Bermuda-domiciled holding company. For more information, please visit www.syncora.com.

FORWARD-LOOKING STATEMENTS

This release contains statements about future results, plans and events that may constitute “forward-looking” statements. You are cautioned that these statements are not guarantees of future results, plans or events and such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Syncora Guarantee’s control. These factors include, but are not limited to: Syncora Guarantee’s ability to close the 2009MTA and the RMBS Transaction Agreement; the suspension of all claims payments; Syncora Guarantee’s ability to maintain minimum policyholders’ surplus even if it closes the 2009 MTA and the RMBS Transaction Agreement; higher losses on guaranteed obligations due to deterioration in the credit and mortgage markets; the suspension of writing substantially all new business; the effect of adverse developments in the credit and mortgage markets on Syncora Guarantee’s in-force business; higher loss reserves estimates and the adequacy of the loss reserves; uncertainty as to the fair value of CDS contracts and liabilities thereon; decision by Syncora Guarantee’s regulators to take regulatory action such as rehabilitation or liquidation of Syncora Guarantee at any time; Syncora Guarantee being required to make mark-to-market termination payments under its CDS contracts; Syncora Guarantee’s ability to continue as a going concern; the performance of invested assets; payment of claims on guaranteed obligations, including Jefferson County, Alabama and RMBS transactions; bankruptcy events involving counterparties to CDS contracts; the potential loss of certain control rights under certain financial guarantee insurance; non-payment of premium and makewholes owed or cancellation of policies; impact of the non-payment of dividends on Syncora Holdings Ltd.’s series A preference shares on the composition of Syncora Holdings Ltd.’s Board of Directors; uncertainty in portfolio modeling which makes it difficult to estimate potential paid claims and loss reserves; unavailability of funds due to capitalization of Drop-Down Company under the 2009 MTA; unavailability of funds due to consideration expected to be paid to certain of the counterparties under the 2009 MTA; potential adverse developments at Drop-Down Company and recapture of business to be ceded to Drop-Down Company under the 2009 MTA; the financial condition of Syncora Guarantee (U.K.) Limited and action by the Financial Services Authority; requirement of Syncora Guarantee to provide Syncora Guarantee (U.K.) Limited with sufficient funds to maintain its minimum solvency margin; challenges to the 2008 MTA and/or 2009 MTA; ratings downgrades or the withdrawal of ratings; defaults by counterparties to reinsurance arrangements; the interconnectedness of risks that affect Syncora Guarantee’s reinsurance and insurance portfolio and financial guarantee products; termination payments related to less traditional products, including CDS contracts, possibly in excess of current resources; nonpayment of premiums by policyholders; changes in accounting policies or practices or the application thereof; uncertainty with respect to the valuation of CDS contracts; changes in officers or key employees; further deterioration in general economic conditions, including as a result of the financial crisis as well as inflation, interest rates, foreign currency exchange rates and other factors and the effects of disruption or economic contraction due to catastrophic events or terrorist acts; the commencement of new litigation or the outcome of current and new litigation; legislative or regulatory developments, including changes in tax laws and regulation of mortgages; losses from fraudulent conduct due to unconditional and irrevocable nature of financial guarantee insurance; problems with the transaction servicers in relation to structured finance transactions; limitations on the availability of net operating loss carryforwards; uncertainty as to federal income tax treatment of CDS contracts; liquidity risks including due to undertakings with the NYID; conflicts of interests with significant shareholders of Syncora Holdings; limitations on the transferability of the common shares of Syncora Holdingsand other additional factors, risks or uncertainties described in Syncora Holdings’ filings with the Securities and Exchange Commission, including in its Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as amended. Readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date they are made. Syncora Guarantee does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made.

Source: Syncora Guarantee Inc.; Syncora Holdings Ltd.

Investor and Media, Michael Gormley, +1-212-478-3463, michael.gormley at scafg.com