Canyon Capital Advisors, the fourth largest shareholder of Ambac Financial Group, started a board fight at the bond firm on Monday, urging changes in the leadership and nominating three candidates for the company's board.

Reuters reported that Canyon Capital which holds a 4.5 percent share in the company  has been seeking to persuade Ambac Financial group to find better methods to accelerate the settlement of $4 billion in insurance claims. Canyon, with $250 million of exposure to its bonds, is also an Ambac creditor. Moreover, Canyon has established a significant economic interest in these claims, and so would benefit from the changes they are currently pressing.

Ambac responded to the hedge fund's nominations, saying that the credit exposure of Canyon Capital is $367 million, which also includes deferred payments. The filings show that as of Monday, the equity of the hedge fund was worth $35.6 million.

According to The New York Times, John R. Brecker, director of ACA Financial Guaranty, Eugene I. Davis, chief executive of the Pirinate Consulting Group, and Frederick Arnold, the chief financial officer of Convergex Group. Ambac argued that these roles of debt investor and shareholder are a conflict of interest for Canyon.

Canyon previously persuaded Ambac to ask the Commissioner of Insurance of the State of Wisconsin to fast-track Ambac's settlement of the claims, says Fin Alternatives. Ambac contended that the matter is entirely in the hands of the regulator. Although the regulator has no control on who sits on Ambac's board, it can veto appointments to the board of Ambac's operating subsidiary which oversees the handling of the insurance claims. Canyon has sent a request to Ambac to buy back the claims itself in the open market or practice commutation.

Last week, Canyon Capital went public with its frustration with the management of Ambac, hammering the performance and pay of Chief Executive Officer Nader Tavakoli. Ambac Financial Group shareholders have until Tuesday to nominate directors for election at the annual meeting.