Assured Guaranty Files Motion to Lift Automatic Stay and Commence an Action Against PREPA for the Appointment of a Receiver

Category:

Tuesday, July 18, 2017 2:30 pm EDT

Dateline:

HAMILTON, Bermuda

Public Company Information:

NYSE:
AGO

HAMILTON, Bermuda--(BUSINESS WIRE)--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.

Contact:

Assured Guaranty Ltd.
Robert Tucker, 212-339-0861
Senior Managing Director, Investor Relations and Corporate Communications
rtucker@assuredguaranty.com
or
Media:
Ashweeta Durani, 212-408-6042
Vice President, Corporate Communications
adurani@assuredguaranty.com