Assured Guaranty, the biggest municipal bond insurer, lashed out Wednesday at a federal oversight board decision allowing the Puerto Rico Electric Power Authority to proceed with Title III bankruptcy filing.
PREPA, which has issued bonds insured by Assured, submitted a petition in the United States District Court of Puerto Rico after the Puerto Rico Oversight Board approved the Title III legal process Friday. The utility, which has a $9 billion debt burden, was allowed to proceed with a form of bankruptcy protection under the Puerto Rico Oversight Management, and Economic Stability Act of 2016.
Dominic Frederico, president and CEO of Assured, said in a statement Wednesday that the Oversight Board went beyond the “fundamental purpose” of PROMESA to implement consensual restructurings that restore fiscal health and enable Puerto Rico to regain access to the capital markets. He said a Restructuring Support Agreement rejected by the board would have provided “significant liquidity and debt relief” and proved a more viable option than the expensive path of bankruptcy.
“By rejecting the RSA and approving a Title III bankruptcy, the Oversight Board has shown that it has no intention of seeking consensual resolutions and is instead committed to reneging on as many of Puerto Rico's obligations to stakeholders as possible,” said Frederico. “We believe that it is in the best interests of all parties involved that the Trump Administration and U.S. Congress step in and restore the rule of law to avoid years of litigation and many wasted expenses for Puerto Rico.”
The press office for the Puerto Rico Oversight Board did not immediately respond for comment on the Assured statement.