Assured Guaranty Protects Insured Bondholders from Puerto Rico Defaults
July 13, 2022
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 July 1, 2022. The table below lists the defaulting obligors, the total payments due July 1, 2022 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 $152 million of payment defaults on July 1, 2022 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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On March 15, 2022, the Modified Eighth Amended Title III Joint Plan of Adjustment, confirmed on January 18, 2022, was consummated, pursuant to which Assured Guaranty, among other things, fully paid claims on all of its directly insured Puerto Rico General Obligation (GO) bonds, other than certain GO bonds whose holders made certain elections. On the same date and pursuant to the same Plan of Adjustment, Assured Guaranty fully paid claims on all of its directly insured Puerto Rico Buildings Authority (PBA) bonds, other than certain PBA bonds whose holders made certain elections. As a result, its insurance exposure to Puerto Rico GO and PBA was greatly reduced.
In addition, as a result of the consummation on March 15, 2022 of the Puerto Rico Convention Center District Authority (PRCCDA) Modification and the Puerto Rico Infrastructure Financing Authority (PRIFA) Modification, and the related claim payments made by Assured Guaranty, Assured Guaranty’s obligations under its insurance policies covering debt of the PRCCDA and PRIFA were extinguished.
Assured Guaranty is continuing its efforts to resolve two other Puerto Rico insured exposures that are in payment default, the Puerto Rico Highways and Transportation Authority (PRHTA) and the Puerto Rico Electric Power Authority (PREPA).
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The following table shows the amounts due on July 1, 2022 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 have not yet been paid but are expected to be paid for assumed exposure for July 1, 2022 debt service payments.
2) Net claim payments represent net of insurance.
3) Amounts do not reflect substantial recoveries in the form of cash, recovery bonds and contingent value instruments received by Assured Guaranty under the 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 the development, course and duration of the COVID-19 pandemic and the governmental and private actions taken in response, the effectiveness, acceptance and distribution of COVID-19 vaccines and medicines, 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 as a result of the failure to resolve Assured Guaranty's Puerto Rico exposure in a manner substantially consistent with the support agreements signed to date; 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 13, 2022. 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.