In­sur­ers With­draw Suit Against P.R. Fis­cal Plan

The Bond Buyer - - Front Page - By RoBeRt Slavin

As­sured Guar­anty Ltd. and Na­tional Pub­lic Fi­nance Guar­an­tee Corp. with­drew a suit against Puerto Rico in the Ti­tle III bank­ruptcy case, say­ing re­cov­ery ef­forts af­ter Hur­ri­cane Maria should take prece­dence.

The bond in­sur­ers filed the pro­ceed­ing on May 3 in op­po­si­tion to the fis­cal plan, ap­proved March 13 by Puerto Rico Over­sight Board, that would limit pay­ments to 24 cents of ev­ery dol­lar of debt ser­vice due over the next nine years.

On Fri­day they filed pa­pers in the U.S. Dis­trict Court for Puerto Rico to dis­miss the ad­ver­sary pro­ceed­ing with­out prej­u­dice. “While we con­tinue

to be­lieve the cur­rent fis­cal plan is il­le­gal, we have de­ter­mined to vol­un­tar­ily dis­miss our com­plaint with­out prej­u­dice at this time due to the cri­sis in Puerto Rico fol­low­ing Hur­ri­cane Maria, and the high like­li­hood that the fis­cal plan will have to be re­vised,” said Do­minic Fred­erico, chief ex­ec­u­tive of­fi­cer of As­sured Guar­anty. “Now is no time to be ar­gu­ing over th­ese is­sues, when res­i­dents of the is­land are suf­fer­ing. The cur­rent focus should re­main on restora­tion and relief for Puerto Rico.

“Ad­di­tion­ally, it would be an avoid­able mis­al­lo­ca­tion of time, money and ju­di­cial re­sources to lit­i­gate is­sues about a fis­cal plan that is ex­pected to change,” Fred­erico con­tin­ued.

Ex­tend­ing the Puerto Rico Over­sight, Man­age­ment, and Eco­nomic Sta­bil­ity Act’s re­quire­ment for a five year plan, the board ap­proved its plan to cover rev­enues and ex­pen­di­tures for 10 fis­cal years.

The plan didn’t cover more re­mote pub­lic sec­tor en­ti­ties like the Puerto Rico Elec­tric Power Au­thor­ity or the Puerto Rico Aqueduct and Sewer Au­thor­ity.

In the in­sur­ers’ ad­ver­sary com­plaint they had ar­gued, among other things, that the plan dis­re­garded the con­sti­tu­tional pri­or­i­ties and liens that PROMESA said the plan must fol­low. The in­sur­ers with­drew their com­plaints, be­cause they said hur­ri­cane re­cov­ery should be the top pri­or­ity.

“Hur­ri­cane Maria’s im­pact on lives, prop­erty and in­fra­struc­ture on the is­land of Puerto Rico is with­out prece­dent,” Na­tional C.E.O. Bill Fal­lon said. “With the focus quite rightly on res­cue, re­cov­ery and the restora­tion of ba­sic ser­vices to Puerto Rico’s cit­i­zens and a strong like­li­hood that the ex­ist­ing fis­cal plan will have to be amended in the wake of the hur­ri­cane, we do not be­lieve it would be ap­pro­pri­ate to move for­ward with the lit­i­ga­tion at this time.

“As it has for more than three decades, Na­tional will con­tinue to sup­port the peo­ple of Puerto Rico and we look for­ward to work­ing with the com­mon­wealth and the Over­sight Board on a re­vised fis­cal plan that al­lows Puerto Rico to re­build its in­fra­struc­ture, re­store its fis­cal health, and re­turn to the mu­nic­i­pal mar­kets,” Fal­lon con­tin­ued.

As of May, As­sured in­sured $1.75 bil­lion of Puerto Rico gen­eral obli­ga­tion bonds and other com­mon­wealth gov­ern­ment debt. In ad­di­tion it in­sured $3.65 bil­lion in other Puerto Rico pub­lic sec­tor debt.

At the time, Na­tional in­sured $881 mil­lion of GO and other com­mon­wealth gov­ern­ment debt. Be­yond that, it in­sured $2.7 bil­lion of other Puerto Rico pub­lic sec­tor debt.

The ad­ver­sary pro­ceed­ing that the in­sur­ers dropped Fri­day was the ear­li­est filed of the Ti­tle III bank­ruptcy case pro­ceed­ings.

How­ever, there are 23 other ad­ver­sary pro­ceed­ings for the four Ti­tle III bank­ruptcy cases. At least two of them have As­sured Guar­anty as a plain­tiff. Both pro­ceed­ing 17-00155 and 17-00156 con­cern Puerto Rico High­ways and Trans­porta­tion Au­thor­ity bonds se­cured by liens on pledged spe­cial rev­enues.

As­sured Guar­anty de­clined to com­ment on th­ese suits. ◽

”Hur­ri­cane Maria’s im­pact on lives, prop­erty and in­fra­struc­ture on the is­land are with­out prece­dent,” said Na­tional’s CEO Bill Fal­lon.

As­sured Guar­anty CEO Do­minic Fred­erico said the pri­or­ity now is to focus on relief for Puerto Rico af­ter the hur­ri­cane’s dev­as­ta­tion.

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