Assured Guaranty Files Adversary Complaint Challenging PREPA’s Failure to Remit Special Revenue Bond Collateral For the Pay...
August 08 2017 - 9:09AM
Business Wire
Assured Guaranty Ltd. (NYSE: AGO) (together with its
subsidiaries, Assured Guaranty) released the following comments
regarding the adversary complaint filed yesterday challenging the
Puerto Rico Electric Power Authority’s (PREPA) failure to remit
special revenue bond collateral for the timely payment of debt
service on its bonds (Bonds).
Two Assured Guaranty bond insurance subsidiaries, Assured
Guaranty Municipal Corp. and Assured Guaranty Corp., filed an
adversary complaint in Federal District Court in Puerto Rico
yesterday seeking (i) a judgment declaring that the application of
pledged special revenues to the payment of the Bonds is not subject
to the automatic stay under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act (PROMESA) and that PREPA has
violated the special revenue protections provided to the Bonds
under the Bankruptcy Code by failing to remit such revenues for the
payment of the Bonds; (ii) a judgment declaring that capital
expenditures and other PREPA expenses that are not reasonable and
necessary to operate the electric system do not constitute
“necessary operating expenses” under the Bankruptcy Code and
therefore may not be charged against PREPA’s special revenues prior
to the payment of the Bonds; (iii) a judgment declaring that the
use of PREPA’s special revenues to pay capital expenditures and
other PREPA expenses that are not reasonable and necessary to
operate the electric system prior to the payment of the Bonds
violates the Takings and Due Process Clauses of the U.S.
Constitution; (iv) an injunction enjoining PREPA from (A) taking or
causing to be taken any action that would further violate the
special revenue protections provided to the Bonds under the
Bankruptcy Code, and (B) using its special revenues to pay for
capital expenditures and other PREPA expenses that are not
reasonable and necessary to operate the electric system prior to
the payment of the Bonds; and (v) an order requiring PREPA to remit
the pledged special revenues securing the Bonds in accordance with
the terms of the special revenue provisions set forth in the
Bankruptcy Code.
With this action, Assured Guaranty seeks to remedy PREPA’s
failure to comply with its obligation to remit pledged special
revenues on a monthly basis to the bond trustee for the timely
payment of debt service on the Bonds. Rather than comply with its
obligations under the bond documents, PREPA has chosen to use its
Title III bankruptcy proceeding to withhold and misapply special
revenue bond collateral securing the payment of the Bonds, without
providing just compensation to PREPA bondholders and their
insurers. PREPA has no basis to ignore those contractual
obligations or take collateral pledged as security for PREPA
bondholders. Congress incorporated the special revenue protections
of the Bankruptcy Code into PROMESA when it was enacted. These
federal statutory protections guarantee that holders of PREPA’s
special revenue bonds and their insurers receive the benefit of
their bargain by protecting the lien on PREPA’s postpetition
special revenues and ensuring the Title III bankruptcy filing does
not operate as a stay against application of the pledged special
revenues to the timely repayment of the Bonds. Enforcement of these
protections is essential to the orderly marketing of municipal
revenue bonds and for municipal issuers to retain critical access
to the revenue bond market nationwide. Finally, this failure to
apply special revenue bond collateral to the timely payment of the
Bonds should prevent PREPA and other Commonwealth public
corporations from accomplishing a primary objective of PROMESA,
which is the ability to return to the capital markets.
Irrespective of PREPA’s Title III bankruptcy filing and failure
to remit pledged special revenues to the timely payment of debt
service on the Bonds, payments to holders of the 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 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 August 8, 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170808005865/en/
Assured Guaranty Ltd.Robert Tucker, 212-339-0861Senior Managing
Director, Investor Relations and Corporate
Communicationsrtucker@assuredguaranty.comorMedia:Ashweeta Durani,
212-408-6042Vice President, Corporate
Communicationsadurani@assuredguaranty.com
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