Assured Guaranty Protects Insured Bondholders from Puerto Rico Defaults: No Actions Required of Assured Guaranty Bondholders
January 17, 2023
Assured Guaranty Municipal Corp. (AGM) and Assured Guaranty Corp. (AGC), two bond insurance subsidiaries of Assured Guaranty Ltd. (NYSE: AGO) (together with its subsidiaries, Assured Guaranty), made claim payments to holders of certain bonds on which Puerto Rico and certain of its instrumentalities defaulted on January 1, 2023. The table below lists the defaulting obligors, the total payments due January 1, 2023 from such obligors on bonds insured by Assured Guaranty, and the total claim payments made by Assured Guaranty.
As always, investors owning Puerto Rico-related bonds insured by Assured Guaranty continue to receive uninterrupted full and timely payment of scheduled principal and interest in accordance with the terms of Assured Guaranty’s insurance policies.
No action is required on the part of investors in bonds insured by Assured Guaranty to receive their scheduled debt service payments, as the relevant bond trustee, paying agent or, in the case of secondary market policies, custodian files the claim with Assured Guaranty on behalf of the bondholders. Upon receipt of a claim from a bond trustee, paying agent or custodian, Assured Guaranty makes the claim payment directly to that party, which then distributes the funds to investor accounts in the same manner as when paid by the obligor. Under its standard municipal bond insurance policy, Assured Guaranty makes the claim payment no later than one business day after a claim is received, but not before the payment due date.
As of the date of this statement, Assured Guaranty had been notified of $23 million of payment defaults on January 1, 2023 relating to Puerto Rico exposures it insures. All claim notices received have been processed in full and payment made. For any obligors where the obligor owed a payment and Assured Guaranty paid no claims or paid only partial claims, the payments or balance of payments were made by the obligor, or from the obligor’s available reserves, or by the primary insurer.
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As a result of the consummation on March 15, 2022 of each of the Puerto Rico General Obligation (GO)/Puerto Rico Buildings Authority (PBA) Plan, Puerto Rico Convention Center District Authority (PRCCDA) Modification and Puerto Rico Infrastructure Financing Authority (PRIFA) Modification (together, the March Puerto Rico Resolutions) including claim payments made by the Company under the March Puerto Rico Resolutions, the Company’s obligations under its insurance policies covering debt of the PRCCDA and PRIFA were extinguished and its insurance exposure to Puerto Rico GO and PBA was greatly reduced.
On December 6, 2022, the Modified Fifth Amended Title III Plan of Adjustment of the Puerto Rico Highways and Transportation Authority (the HTA Plan) went into effect, marking the exit of the Puerto Rico Highways and Transportation Authority (HTA) from bankruptcy. Under the HTA Plan, the Company’s insurance exposure to the HTA was greatly reduced.
The Company believes the consummation of the March Puerto Rico Resolutions on March 15, 2022 and the consummation of the HTA Plan on December 6, 2022 mark significant milestones in its Puerto Rico loss mitigation efforts. Assured Guaranty is continuing its efforts to resolve its other Puerto Rico insured exposure that is in payment default, the Puerto Rico Electric Power Authority (PREPA).
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The following table shows the amounts due on January 1, 2023 and related claims paid, as well as cumulative claims paid or expected to be paid since January 2016, for Puerto Rico-related bonds currently insured by Assured Guaranty.
1. Includes amounts that may not yet been paid as of the date of this Company Statement but are expected to be paid for assumed exposure for January 1, 2023 debt service payments.
2. Net claim payments represent net of reinsurance.
3. Amounts do not reflect substantial recoveries in the form of cash, recovery bonds and contingent value instruments received by Assured Guaranty under the GO/PBA Plan of Adjustment
and the HTA Plan of Adjustment and as described in Assured Guaranty's most recent filings with the Securities and Exchange Commission.
The information set out above contains forward-looking statements that 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 changes in inflation, interest rates, the world’s credit markets or segments thereof, credit spreads, foreign exchange rates or general economic conditions, including the possibility of a recession; consequences of the conflict in Ukraine, including economic sanctions, fragmentation of global supply chains, volatility in energy prices, the potential for increased cyberattacks, and the risk of intentional or accidental escalation; the development, course and duration of the COVID-19 pandemic and the governmental and private actions taken in response, and the global consequences of the pandemic and such actions; Assured Guaranty's inability to execute its strategies, including its loss mitigation and risk remediation strategies, including insured losses in excess of those expected by Assured Guaranty or the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates for insurance exposures, including as a result the final resolution of Assured Guaranty’s remaining Puerto Rico exposures or the amounts recovered on securities received in connection with the resolution of Puerto Rico exposures already resolved; 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 January 13, 2023. 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.