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.