LONDON, UK / ACCESSWIRE / October 17, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Assured Guaranty Ltd (NYSE: AGO) ("AGO"), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=AGO. Two bond insurance subsidiaries of Assured Guaranty, namely Assured Guaranty Municipal Corp. and Assured Guaranty Corp., announced on October 13, 2017, that they have voluntarily withdrawn their lawsuit against Puerto Rico Electric Power Authority (PREPA) for non-payment of pledged revenues earmarked for the payment of its bonds. AGO had filed the lawsuit against PREPA in August 2017. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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Reason for Withdrawing the Lawsuit against PREPA
AGO's decision is influenced by the massive devastation caused by Hurricane Maria on PREPA's power grid. AGO believes that although PREPA is violating the terms and Special Revenues Provisions and the US Constitution by not paying the pledged revenues for the payment of its revenue bonds for the last three years, PREPA should concentrate on restoring the power grid which have been damaged by Hurricane Maria. The current circumstances and timing are not appropriate for AGO to pursue a legal recourse when the need of the hour is to restore electricity to the island's residents and businesses. Considering this backdrop, Assured Guaranty along with other PREPA creditors have agreed to voluntarily withdraw their complaint against PREPA without prejudice at this time.
Commenting on the withdrawing of the lawsuit against PREPA, Dominic Frederico, President and CEO of Assured Guaranty said:
"We urge the Oversight Board and PREPA to take this opportunity to work collaboratively with creditors, as we did previously, to produce a comprehensive reconstruction plan that ensures power is restored in Puerto Rico as soon as possible and that PREPA moves forward with a workable long-term development plan consensually with all stakeholders."
AGO will continue to have the option of refiling the lawsuit as per the provisions of the current laws. In the event that PREPA does not make timely payment towards its bonds as per terms of the Special Revenues Provisions even after the restoration of the power grid is completed, AGO will explore the option of refiling the lawsuit at that time.
PREPA had signed an agreement with AGO in April 2017 to restructure its debt of approximately $8.9 billion by issuing new bonds with longer maturities. AGO provided the surety to protect bondholders against any defaults by PREPA.
AGO and its subsidiaries had filed a lawsuit against PREPA in August 2017 with the Federal District Court in Puerto Rico after PREPA had failed to remit special revenue bond collateral for the timely payment of debt service on its bonds. The lawsuit sought the Court's assistance in directing PREPA to comply with its obligations by making monthly payments of the pledged special revenues to the bond trustee to ensure the timely payment of debt service on the Bonds. AGO's contention is that PREPA is using the Title III bankruptcy proceedings as an excuse to withhold and divert the special revenue bond collateral securing the payment of the Bonds without planning for payments for the PREPA's bondholders and their insurers.
PREPA is contractually obliged to make timely payments to its bondholders or take collateral pledged as security to these bondholders. Special revenue protection clauses were incorporated for revenue protection in PROMESA's Bankruptcy Code when it was incorporated by Congress. As per the provisions of these clauses, holders of PREPA's special revenue bonds and their insurers are covered under the federal statutory protections guarantee. As such these bondholders have a lien on PREPA's post-petition special revenues. This means that even if PREPA files for Title III bankruptcy, the pledged revenues continue to be earmarked towards timely repayment of the Bonds.
AGO being the bond insurer is obliged to make timely payments of any debt service on the Bonds to the bondholders, for the lifetime of the bonds, without any interruptions, and irrespective of the fact that PREPA has filed for Title III bankruptcy and has failed to make timely payments towards the debt service on the bonds. However, in these circumstances, AGO takes over the rights of the insured bondholders as per terms of the AGO's insurance policies, thereby becoming a bondholder itself.
About Assured Guaranty Ltd
AGO is the leading provider of financial guaranty insurance, and the Company is a Bermuda-based holding company for the Assured Guaranty family of Companies. AGO insures and reinsures US municipal bonds, international infrastructure transactions, and structured financings. Its subsidiaries include:
- Assured Guaranty Municipal Corp. (AGM), which guarantees only US municipal bonds and international infrastructure financings;
- Assured Guaranty Corp. (AGC), which is a diversified financial guarantor insuring both public finance and structured finance obligations, including asset-backed securities;
- Municipal Assurance Corp. (MAC), which guarantees only select categories of US municipal bonds and is owned jointly by AGM and AGC;
- Assured Guaranty Re Ltd (AG Re), which is a Bermuda insurance Company specializing in financial guaranty reinsurance. It is also the world's largest financial guaranty reinsurer and serves both affiliated and non-affiliated insurance companies.
The Puerto Rico Electric Power Authority is a public utility Company that offers a full range of power services. PREPA is a public corporation of the Government of Puerto Rico. The Utility produces, transmits, distributes, and sells electricity. As a government-backed utility, it is empowered to make contracts, acquire properties, borrow money, and issue bonds.
Last Close Stock Review
Assured Guaranty's share price finished yesterday's trading session at $37.07, marginally up 0.49%. A total volume of 625.16 thousand shares have exchanged hands. The Company's stock price surged 29.30% in the previous twelve months. Shares of the Company have a PE ratio of 4.20 and have a dividend yield of 1.54%. The stock currently has a market cap of $4.40 billion.
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