Assured Guaranty Comments on Appointments Clause Decision and Upholding the Rule of Law

February 22, 2019

Dominic Frederico, CEO and President of Assured Guaranty, commented on the recent First Circuit Court of Appeals ruling on PROMESA and the appointment of its Board members, as it relates to bringing an end to contentious Title III proceedings – proceedings that are projected to cost Puerto Rico $1.5 billion over the next 5 years alone:

“The reversal of another of the Title III Court decisions, this time regarding the way in which the Oversight Board members were appointed, continues to draw attention to an issue that has plagued PROMESA’s overall operations – inadequate adherence not just to PROMESA’s own statutory requirements, but also to existing law. Simply put, activities under PROMESA to date have strayed from the rule of law and failed to enforce PROMESA’s key idea: fiscal responsibility and restoring capital market access for the long-term sustainable economic future of the Commonwealth of Puerto Rico. While Oversight Board consultants continued this week to publicly rail against creditors and justify past actions, they and an army of advisors continue to miss on a key deliverable of PROMESA: enhancing negotiations between creditors and the Government of Puerto Rico.  Instead, unfortunately, one ultra-aggressive action after another has been taken as lawyers and consultants for the Government and Oversight Board spend the $1.5 billion budgeted to them by the existing board, on the backs of Puerto Rico residents and their investors alike.  The five overturned rulings of the Title III Court should be a signal to the attorneys  and advisors for the Government and Oversight Board that rather than continue to repudiate valid legal obligations, stretch to invalidate liens, and attempt to turn upside down decades of efficient municipal finance history, all those involved should finally, in good faith, attempt to end adversarial and costly legal proceedings, saving the Commonwealth and its instrumentalities billions of dollars through consensual restructuring of debt and improved management instead.

Assured Guaranty has been committed from the start, even before the enactment of PROMESA, to help Puerto Rico restructure. In 2015-17, we had an agreement to restructure PREPA’s debt that had the sign-off of two successive Puerto Rico Governors, the Puerto Rico legislature, the Puerto Rico Energy Commission, PREPA and, effectively, the U.S. Congress before being summarily rejected by the newly appointed Oversight Board before Hurricane Maria. That PREPA Restructuring Support Agreement could have formed the basis for a swift resolution to the rest of the island’s debt restructuring and saved the island hundreds of millions of dollars in legal and consultant fees as well as provided more stability from which to financially and operationally rebound from the hurricane.  This was just one example of many comprehensive proposals we have made. The time and money of all stakeholders should instead be used more productively by working together to address issues such as the island’s aging infrastructure and overall fiscal management and transparency (the last audited financial statements for the Commonwealth were for FY 2015, and did not receive a clean opinion by the auditor) and in other ways that would help ensure that the Government of Puerto Rico is positioned to successfully implement its plans for the future.

For decades, Assured Guaranty’s only involvement has been to reduce the costs of borrowing for Puerto Rico, after its government chose to issue debt to finance capital plans. We are hopeful that as the higher courts continue to provide due support for the fundamental rule of law, we can move more rapidly toward solutions that serve the American citizens who are the island’s residents, and facilitate investment in Puerto Rico for decades more. It is time to create Fiscal Plans that:

• are based on financial information supported by current audited financial statements
• respect the relative lawful priorities, liens and agreements of the Commonwealth and its instrumentalities as demanded by PROMESA and the Puerto Rico Constitution
• base projections on historical reality rather than draconian and egregiously biased assumptions
• define ‘essential public services’ as required by PROMESA, and
• provide a method to achieve ‘access to the capital markets.’

We continue to look forward to working with the Government of Puerto Rico in good faith, and to a PROMESA process that truly addresses and respects the requirements set forth in the statute as constructed by the United States Congress, and that works off of sound methodologies and assumptions about Puerto Rico’s future revenues, economic growth and debt capacity to achieve a healthy financial future for Puerto Rico and its residents. Only with a process that respects the rule of law and restores investment in the island’s economy, infrastructure and development, will a better and brighter future be achieved for the people of Puerto Rico.”

Forward-Looking Statements

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 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 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 February 22, 2019. 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.