_the exchange-traded debt is trading at 25¢ on the dollar. Mr. Market seems to think its just a matter of time before "time out" and Chap 11. _

There is no such a thing like Market for Ambac bonds.

There are markets.

The exch traded debt market is hardly the market of the most informed!

The buyers and sellers are mostly retail. They probably act more with panic and euphoria than with data (interaction with insiders).

Ambac 2011 bonds are selling at 60% on trades of 1MM+ !
Ambac 2023 bonds yesterday traded at 75% on 1MM+ trades!

Certainly the buyers of 2011 and 2023 would not be buying if they think that Ambac is on the death bed!

I personally do not know what is going to happen to Ambac.