Major FGIC Holders Disclose Materials through Kramer Levin (Counsel)

NEW YORK--()--Assured Guaranty Ltd. (together with its subsidiaries, collectively, “Assured Guaranty”) today filed a Current Report on Form 8-K disclosing that it had been engaged in confidential discussions with six large policyholders of Financial Guaranty Insurance Company (“FGIC”) on the terms of a transaction which would have resulted in:

  • distribution of approximately $1.9 billion in cash to commuting FGIC policyholders and holders of FGIC deferred payment obligations in FGIC’s non-investment grade portfolio; and
  • Assured Guaranty Corp. providing 100% quota share reinsurance on FGIC’s investment-grade portfolio.

Consummation of the transaction would have been subject to a number of conditions, including the commutation of at least 90% of FGIC’s non-investment grade portfolio.

The six policyholders (“Major FGIC Holders”) listed below collectively hold approximately 33% of all distressed FGIC-wrapped securities (by current/accreted face amount as of September 30, 2016) and approximately 50% of all current and estimated future claims under FGIC policies (on a net present value basis). These holdings include approximately $800 million of Detroit COPs, approximately $340 million of Puerto Rico-related securities and approximately $1.3 billion of RMBS.

The terms of the proposed transaction are set forth in the non-binding term sheet dated September 27, 2016, attached as Exhibit A.

Assured Guaranty and the Major FGIC Holders agreed to hold the term sheet confidential until December 9, 2016 while they discussed the terms with FGIC. Representatives of the Major FGIC Holders transmitted the term sheet to FGIC on or around September 27, 2016.

On December 2, 2016, FGIC informed Assured Guaranty and representatives of the Major FGIC Holders that it decided not to pursue the transaction at this time.

The Major FGIC Holders believe that the proposed agreement provides extremely compelling economic benefits to FGIC policy holders as a group.

Under the proposed transaction:

  • FGIC policyholders commuting their current and future claims would receive approximately 70% of current or estimated future claims on a net present value basis against FGIC in cash at closing of the proposed transaction, plus a surplus note representing the right to receive 80% of future recoveries (subject to regulatory approval of any surplus note payments).
  • FGIC’s investment grade portfolio would have been fully reinsured and managed by Assured Guaranty Corp., an insurer with $3.6 billion of claims-paying resources.

Parties interested in learning more about the proposed transaction, please email Houlihan Lokey, the financial adviser to the Major FGIC Holders, at with your contact information. Please note that the allocation of commutation proceeds among FGIC policies remains subject to negotiation.

The disclosure relating to the non-binding term sheet is qualified in its entirety by reference to the term sheet itself, attached at Exhibit A. In making this disclosure, the Major FGIC Holders assume no obligation to provide additional information with respect to any proposed transaction or any discussions with FGIC.

The Major FGIC Holders are: Aurelius Capital Management, LP, solely as manager on behalf of its managed entities and not in its individual capacity; Canyon Capital Advisors LLC (on behalf of its participating funds and/or clients); King Street Capital Management, L.P., on behalf of certain entities it manages; Monarch Alternative Capital LP, on behalf of certain of its advisory clients; and Panning Capital Management, LP, on behalf of certain entities it manages; and Taconic Capital Advisors, L.P. on behalf of certain managed funds and accounts.


No Major FGIC Holder purports to speak on behalf of any entity other than the funds it manages. The term sheet and non-disclosure agreements described herein were the result of discussions each Major FGIC Holder (on behalf of its managed funds) has had with Assured Guaranty with respect to an agreement between the two of them, and not any agreement between any Major FGIC Holder (or any fund managed thereby) and any other Major FGIC Holder (or any fund managed thereby).

In particular, there is no agreement between or among Major FGIC Holders with respect to the purchase, sale or voting of any securities referenced in this release or the term sheet; the Major FGIC Holders are acting individually and not as a group, except to the extent they jointly agree to retain counsel or other advisors.

Each Major FGIC Holder disclaims any fiduciary or other duty to any party (other than any duty each Major FGIC Holder may owe to any fund it manages; any duty to such fund being unaffected hereby). The information contained herein reflects opinions of one or more Major FGIC Holders and/or their advisors as of the date of this release; that information and any opinion based thereon is subject to change, and no representation or warranty relating thereto is made concerning the accuracy or reliability of any information or opinion contained herein. Each Major FGIC Holder and the each advisor to the Major FGIC Holders disclaims any duty to update any opinions, information or other statements contained herein.

Nothing herein should be considered investment advice or a recommendation to buy or sell any specific security. This release does not constitute an offer to sell or the solicitation of an offer to buy any interests in any entity, including any Major FGIC Holder or any fund managed thereby. Such an offer or solicitation may only be made pursuant to definitive offering materials, subscription documents and, where necessary, an order of a court of appropriate jurisdiction.


Houlihan Lokey
Financial Adviser to the Major FGIC Holders
Kramer Levin Naftalis & Frankel LLP
Thomas Moers Mayer, 212-715-9169
Counsel to the Major FGIC Holders

Release Summary

Assured Guaranty Ltd. filed a Current Report on Form 8-K disclosing...

Kramer Levin Naftalis & Frankel LLP