HAMILTON, Bermuda--(EON: Enhanced Online News)--Two bond insurance subsidiaries of Assured Guaranty Ltd. (NYSE: AGO) (together with its subsidiaries, Assured Guaranty) have made interest payments to holders of insured general obligation (GO) and other bonds after Puerto Rico and certain of its instrumentalities failed to pay on January 3, 2017. The table below lists the total interest payments due January 1 (payable January 3) from Puerto Rico issuers on bonds insured by Assured Guaranty Municipal Corp. (AGM) and Assured Guaranty Corp. (AGC), and the total expected gross and net claim payments by Assured Guaranty for the bonds that defaulted. Assured Guaranty’s subsidiary Municipal Assurance Corp. (MAC) has no insured exposure to Puerto Rico.
As always, investors owning Puerto Rico-related bonds insured by Assured Guaranty will continue to receive uninterrupted full and timely payment of scheduled principal and interest in accordance with the terms of Assured Guaranty’s insurance policies. The bond trustee, paying agent or, in the case of secondary market policies, custodian files a claim with Assured Guaranty on behalf of the bondholders, and therefore no action is required on the part of investors to receive their scheduled debt service payments. Once Assured Guaranty receives a filed claim, it makes the claim payment directly to the relevant bond trustee, paying agent or custodian, who then distributes the funds in the same manner as when paid by the issuer. Under its standard municipal bond insurance policy, Assured Guaranty makes its claim payment no later than one business day after it receives the claim, but not before the payment due date.
Also on January 3, the Puerto Rico Electric Power Authority (PREPA) made the full interest payment due on its bonds insured by Assured Guaranty, and no insurance claims were filed in respect of such bonds.
“While the outgoing Puerto Rico administration has once again chosen to violate Puerto Rico’s constitution by ignoring the senior payment priority securing the Commonwealth’s GO bonds, we look forward to working with the new administration, PROMESA Oversight Board and other creditors to achieve consensual restructuring agreements that respect the constitutional, statutory, contractual and property rights of creditors while also supporting the island’s economic recovery,” said Dominic Frederico, President and CEO of Assured Guaranty.
“We were pleased that PREPA made its bond interest payment, and we continue to join PREPA and the other participating creditors in seeking implementation of the consensual restructuring contemplated by the PREPA restructuring support agreement,” he continued.
Assured Guaranty estimated the claims shown in the table below and was prepared to process claims efficiently, once they were received.
|Interest Due January 1, 2017 on Assured Guaranty Insured Bonds|
|and Claims Expected to Be Paid|
|($ in millions)|
|Payment Due From||Claims Assured|
|Obligor on||Guaranty Has|
|Assured Guaranty||Paid or Expects to|
|Insured Bonds||Pay (Gross|
Commonwealth Constitutionally Guaranteed
|Commonwealth of Puerto Rico (General Obligation)1||$40||$39|
|Puerto Rico Public Buildings Authority (PBA)||5||5|
|Public Corporations - Certain Revenues Subject to Clawback|
|Puerto Rico Highways and Transportation Authority (PRHTA - Transportation)||25||0|
|Puerto Rico Highways and Transportation Authority (PRHTA - Highway)||15||0|
|Puerto Rico Convention Center District Authority (PRCCDA)||3||0|
|Puerto Rico Infrastructure Financing Authority (PRIFA)||<1||<1|
|Other Public Corporations|
|Puerto Rico Electric Power Authority (PREPA)||18||0|
|Puerto Rico Aqueduct and Sewer Authority (PRASA)||10||0|
|Puerto Rico Municipal Finance Agency (MFA)||1||0|
|Puerto Rico Sales Tax Financing Corporation (COFINA)||0||0|
|University of Puerto Rico (UPR)||0||0|
Expected Reimbursement from External Reinsurers and Other Reimbursements
Estimated Net Claims to be Paid
No principal payments were due on January 1, 2017. Some amounts may not add due to rounding.
1. Includes second-to-pay policies on which no claims are expected.
Data is as of January 4, 2017 and is subject to adjustment. As of January 4, 2017, of the $44 million of total expected claims, Assured Guaranty received $43 million of claim notices, all of which have been processed in full. For any obligor where amounts were due but no claims are expected, the payments were made by the obligor from its available funds or reserves.
With $12 billion in claims-paying resources across its group of companies and approximately $400 million generated each year from its $11 billion investment portfolio alone, Assured Guaranty’s liquidity and capital position are very strong. This is further evidenced by looking at S&P’s capital model, where Assured Guaranty estimates that its excess capital was more than $2.6 billion above S&P’s AAA requirement as of year-end 2015.
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 adverse developments in Puerto Rico or at any of its instrumentalities, an inability or failure of creditors and the Commonwealth to implement a consensual restructuring, litigation that has already been initiated or may be initiated in the future, governmental or legislative action or inaction by Puerto Rico or the United States, 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 January 4, 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.