Assured Guaranty said it is monitoring the Government Development Bank for Puerto Rico's lawsuit over $400 million of tax receipts, some of which are used for payments on bonds the insurer guarantees.
The GDB filed a writ of mandamus in the Court of First Instance, San Juan Superior Court, on Wednesday seeking an order to make the Municipal Revenue Collections Center hand over the money. Some of the money is supposed to be used for bond payments.
One of the bond issuers supported by the money is the Municipal Finance Agency, which had $722 million in bonds outstanding as of August, according to Interactive Data. All but $68 million of this total was insured by Assured Guaranty. After reinsurance Assured Guaranty had $387 million in net exposure to the agency's bonds on Sept. 30, the insurer said.
"Assured Guaranty is closely monitoring the Government Development Bank's lawsuit affecting local property tax revenues pledged as security for the Puerto Rico Municipal Finance Agency's bonds," Assured Guaranty managing director Robert Tucker said in an email. "We will consider all actions necessary to ensure that the pledged tax revenues continue to be available for the full and timely payment of debt service on the MFA Bonds insured by Assured Guaranty. Of course, investors who own bonds insured by Assured Guaranty can be certain that they will receive full and timely payment of principal and interest when due in accordance with the terms of the insurance policy."
On Aug. 19, 2015 the GDB contacted the center, known as CRIM for its Spanish acronym, stating that its suspension of transfers on June 30 was illegal and demanding the resumption of the transfers. On Sept. 16, CRIM reaffirmed its decision to withhold deposits, according to the GDB.
CRIM did not return a phone call asking for a comment.
Historically, CRIM has collected taxes on real and personal property and transferred the money to the GDB. A 1991 law and a 1997 trust agreement legally bound CRIM to transferring the money to the GDB, the GDB claimed.
Some of the money is used for the amortization and redemption of general obligation bonds issued by the commonwealth and the municipalities, according to the GDB. CRIMS's not making the deposits at the GDB "could be considered a breach of the trust agreement with bondholders of the Municipal Finance Agency," the GDB said.
"Through this illegal action, the CRIM is putting the finances of all municipalities in danger and likely exposing them to claims from their creditors by failing to deposit the funds to repay those loans pursuant to the law," said GDB chief operating officer Karolee García Figueroa.
