Two bond insurance subsidiaries of Assured Guaranty Ltd have resolved their exposure to bonds, as the Puerto Rico Highways and Transportation Authority exited from bankruptcy last week.

On December 6, 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 from bankruptcy for the HTA.

In connection with the HTA Plan, Assured Guaranty has received approximately $104 million of cash and $807 million in par of new bonds backed by toll revenues. Additionally, in third quarter 2022, Assured Guaranty received, in connection with the HTA Plan Support Agreement, $147 million of cash and $672 million original notional amount of contingent value instruments.

Also, as part of HTA’s bankruptcy exit, Assured Guaranty paid off holders of certain HTA bonds insured by subsidiaries Assured Guaranty Municipal Corp and Assured Guaranty Corp and established trusts for holders of other Assured Insured HTA Bonds.

Specifically, Assured Guaranty paid 100 per cent of the principal amount outstanding, plus accrued interest thereon, to holders of certain Assured Insured HTA Bonds representing $711 million in insured net par.

Certain other Assured Insured HTA Bonds, whose holders made certain elections and that represented $451 million in insured net par, were exchanged for new custodial trust units that represent an interest in the legacy insurance policy plus Toll Bonds.

“The HTA’s exit from bankruptcy is another important step forward for Puerto Rico,” said Dominic Frederico, the president and CEO of Assured Guaranty.

“It also eliminates $711 million net par from Assured Guaranty’s insured Puerto Rico exposure. Together with certain other Puerto Rico settlements that went into effect this past March, we’ve reduced our insured Puerto Rico exposure in 2022 by more than $2 billion.

“While the HTA bankruptcy has taken many turns over the past several years, the benefits of our insurance to holders of Assured Insured HTA Bonds have remained constant.

“Up until the effective date, we’ve paid almost $700 million in principal and interest to investors in our insured HTA bonds while holders of uninsured HTA bonds have received nothing.

“Under the HTA Plan that went into effect December 6, investors in Assured Insured HTA Bonds received either a cash payment (equal to 100 per cent of their principal amount outstanding plus accrued interest) or new Trust Units that continue to benefit from the related insurance policies plus have an interest in new Toll Bonds, while uninsured bondholders received plan consideration totalling considerably less than 100 per cent of their principal amount outstanding.

“Assured Guaranty’s only remaining non-paying Puerto Rico exposure is the Puerto Rico Electric Power Authority. As with the HTA and other Puerto Rico entities, we prefer to resolve PREPA’s debt restructuring consensually and remain open to doing so.

“That said, the PREPA bonds have robust creditor protections, and we’ll continue defending our rights in court as necessary.”