Assured Guaranty Ltd. (NYSE:AGO) (together with its subsidiaries,
Assured Guaranty) released the following comments regarding a motion and
form of complaint filed in Federal District Court in Puerto Rico today
by two of its bond insurance subsidiaries, Assured Guaranty Municipal
Corp. (AGM) and Assured Guaranty Corp. (AGC).
The motion and form of complaint seek an order lifting the automatic
stay to allow AGM and AGC to exercise their statutory right to seek the
appointment of a receiver for the Puerto Rico Electric Power Authority
(PREPA) by filing the proposed complaint with a court of competent
jurisdiction. The receiver would ensure that the lien granted to PREPA
bondholders and their insurers as part of their collateral package
produces net revenues in amounts sufficient to timely pay debt service
on the PREPA bonds.
With this action, Assured Guaranty seeks to remedy PREPA’s
re-politicization of its operations, its mismanagement and
inefficiencies, and its failure to increase rates in accordance with its
contractual and statutory obligations. PREPA, which had not sought an
increase in its base rates from the 1980’s through 2015, and whose
current rate is inadequate to pay its debt, defaulted on its bond debt
service payment due on July 3, 2017. For decades, PREPA has been
crippled by mismanagement, corruption and poor performance. Due to such
mismanagement, corruption and poor performance, PREPA has breached its
contractual and statutory obligations to increase rates in amounts
sufficient to generate adequate cash flow to service PREPA’s bond
obligations. The collateral package for PREPA’s bonds includes not only
the net revenues generated by current rates but the statutory and
contractual right to increase rates and appoint a receiver with the
power to seek rate adjustments. PREPA’s use of the automatic stay to
prevent required rate increases and to maintain inadequate current rates
is a taking of property without just compensation. As a result of
PREPA’s defaults, Assured Guaranty and PREPA’s bondholders are entitled
to the appointment of a receiver for PREPA under Puerto Rico law and
PREPA’s bond documents. This entitlement to a receiver is automatic upon
the occurrence of a default under PREPA’s bonds. Lifting the automatic
stay and appointing a receiver for PREPA is necessary to ensure PREPA
bondholders’ collateral package is not diminished and to foster
operational reform by replacing PREPA’s management and depoliticizing
PREPA’s key decision-making. Additionally, the ongoing illegal actions
by both the Puerto Rican government and the PROMESA Oversight Board will
result in further wasted funds incurred by the government on needless
and time-consuming litigation, while at the same time further destroy
any market credibility that remains in the government and the Oversight
Board. If continued, these illegal actions will ultimately prohibit
Puerto Rico's access to capital, which is critical for the island's
economic development and future.
Irrespective of PREPA’s payment defaults on its bonds and its Title III
bankruptcy filing, payments to holders of PREPA bonds insured by Assured
Guaranty will continue to be paid without interruption for the life of
the bonds. Assured Guaranty unconditionally and irrevocably guarantees
full and timely payment of scheduled debt service, in accordance with
the terms of Assured Guaranty’s insurance policies, and upon payment,
takes over the rights of the insured bondholders. Assured Guaranty is
determined to take reasonable and necessary actions to protect its
rights as insurer of PREPA bonds.
With $12 billion* in claims-paying resources across its group of
companies, which includes an $11 billion investment portfolio that alone
generates approximately $400 million of annual investment income each
year, Assured Guaranty’s liquidity and capital positions are very strong.
*Aggregate data for operating subsidiaries within the Assured Guaranty
Ltd. group. Claims on each subsidiary’s insurance policies / financial
guarantees are paid from that subsidiary’s separate claims-paying
resources. Details of the components of claims paying resources are set
forth in the most recent Assured Guaranty Ltd. Financial Supplement,
which may be found at Assuredguaranty.com/agldata.
Cautionary Statement Regarding Forward-Looking Statements
Any forward-looking statements made in this press release reflect
Assured Guaranty’s current views with respect to future events and are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements involve risks and
uncertainties that may cause actual results to differ materially from
those set forth in these statements. These risks and uncertainties
include, but are not limited to, those resulting from Assured Guaranty's
inability to execute its strategies, including its loss mitigation and
risk remediation strategies, and negative developments that may impact
Assured Guaranty's liquidity and capital, and therefore its ability to
make claim payments on time and in full, including less demand for
Assured Guaranty's financial guaranty product, or adverse developments
with respect to its insured or investment portfolio, and other risks and
uncertainties that have not been identified at this time, management's
response to these factors, and other risk factors identified in Assured
Guaranty’s filings with the Securities and Exchange Commission. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which are made as of July 18, 2017. Assured Guaranty
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
Assured Guaranty Ltd. is a publicly traded Bermuda-based holding
company. Its operating subsidiaries provide credit enhancement products
to the U.S. and international public finance, infrastructure and
structured finance markets. More information on Assured Guaranty Ltd.
and its subsidiaries can be found at AssuredGuaranty.com.