AMENDMENT NO. 1 TO CREDIT AGREEMENT

Exhibit 10.31

EXECUTION COPY

AMENDMENT NO. 1 TO CREDIT AGREEMENT

          THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of July 30, 2003 (this “Amendment”), to the Credit Agreement (as defined below) is made by Ambac Financial Group, Inc., a Delaware corporation (“Ambac Financial”), Ambac Assurance Corporation, a Wisconsin stock insurance corporation (“Ambac Assurance”; and, together with Ambac Financial, the “Borrowers”) and the banks, financial institutions and other institutional lenders parties thereto (the “Lenders”).

W I T N E S S E T H:

          WHEREAS, the Borrowers, the Lenders, The Bank of New York, as syndication agent and The Bank of Nova Scotia, as administrative agent (the “Administrative Agent”), are all parties to the Credit Agreement, dated as of August 1, 2002 (as amended or otherwise modified prior to the date hereof, the “Credit Agreement”); and

          WHEREAS, the Lenders hereby agree that, on the terms and subject to the conditions hereinafter set forth, on the Amendment Effective Date, the Credit Agreement shall be amended as set forth below.

          NOW, THEREFORE, the parties hereto hereby covenant and agree as follows:

ARTICLE I

DEFINITIONS

          Terms for which meanings are provided in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendment with such meanings.

ARTICLE II

AMENDMENTS TO CREDIT AGREEMENT

          Effective on (and subject to the occurrence of) the Amendment Effective Date, the provisions of the Credit Agreement referred to below are hereby amended in accordance with this Article II.

          SECTION 2.1. Amendment to Section 1.01.  The following definitions are hereby inserted in the appropriate alphabetical order:

          “Additional Lender” has the meaning specified in Section 2.16(c).

          “Assigned Portion” has the meaning specified in Section 2.16(c).

           SECTION 2.2. Amendment to Section 2.16.  Section 2.16 of the Credit Agreement is hereby amended by adding the following new clause (c) and restating the existing clause (c) thereof in its entirety to read as clause (d) below:

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          SECTION 2.3. Amendment to Section 5.03.  Section 5.03(b) of the Credit Agreement is hereby amended by replacing the reference to “$1,750,000,000” therein with “$2,000,000,000”.

          SECTION 2.4. Amendment to Section 8.08.  Section 8.08 of the Credit Agreement is hereby amended by adding the following new paragraph to the end thereof:

ARTICLE III

CONDITIONS TO EFFECTIVENESS

          This Amendment and the amendments contained herein shall become effective on the date (the “Amendment Effective Date”) when each of the conditions set forth in this Article III shall have been fulfilled to the satisfaction of the Administrative Agent.

          SECTION 3.1.  Counterparts.  The Administrative Agent shall have received counterparts hereof executed on behalf of the Borrowers and the Required Lenders.

          SECTION 3.2.  Costs and Expenses, etc.  The Administrative Agent shall have received evidence of payment of all fees, costs and expenses (including the reasonable fees and out-of-pocket expenses of Mayer, Brown, Rowe & Maw LLP) due and payable pursuant to Section 11.3 of the Credit Agreement, if then invoiced.

ARTICLE IV

MISCELLANEOUS

          SECTION 4.1.  Cross-References.  References in this Amendment to any Article or Section are, unless otherwise specified, to such Article or Section of this Amendment.

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          SECTION 4.2.  Loan Document Pursuant to Credit Agreement.  This Amendment is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with all of the terms and provisions of the Credit Agreement, as amended hereby, including Article VIII thereof.

          SECTION 4.3.  Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

          SECTION 4.4.  Counterparts.  This Amendment may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be an original and all of which shall constitute together but one and the same agreement.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.

          SECTION 4.5.  Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

          SECTION 4.6.  Full Force and Effect; Limited Amendment.  Except as expressly amended hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Credit Agreement and the Loan Documents shall remain unchanged and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms.  The amendments set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be an amendment to, waiver of, consent to or modification of any other term or provision of the Credit Agreement or any other Loan Document or of any transaction or further or future action on the part of either Borrower which would require the consent of the Lenders under the Credit Agreement or any of the Loan Documents.

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          IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above written.

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