Assured Guaranty, the biggest municipal bond insurer, said it ,along with a group of major insured FGIC bondholders, was unable to work out a final agreement on a proposed deal to commute and reinsure a portfolio of Financial Guaranty Insurance Corp. bonds.
Assured disclosed details of the proposed transaction in an 8-K filing Monday, meeting a requirement to do so if an agreement on terms couldn't be reached by Dec. 9. The details of a proposed transaction were set forth in a non-binding term sheet dated Sept. 27. On Dec. 2, FGIC informed Assured Guaranty and representatives of the FGIC insured bondholder group that it decided not to pursue the transaction.
Under the terms contemplated in the transaction documents, Assured would receive an up-front $225 million net payment from FGIC to reinsure the remainder of the non-commuted non-investment grade FGIC insured portfolio on an excess of loss basis and the investment grade FGIC insured portfolio on a 100% quota share basis. Assured would also receive $7.5 million annually for managing FGIC and FGIC UK.
"Assured Guaranty was approached by a number of FGIC's major insured bondholders to participate in a potential FGIC commutation and reinsurance transaction," said Dominic Frederico, president and CEO of Assured. "We believe that a well-structured and fair transaction, which would have benefited current FGIC policyholders and Assured Guaranty shareholders, and served the interests of the financial guaranty industry, was presented to FGIC by the insured bondholder group and Assured Guaranty."
Frederico said Assured is disappointed that it hasn't been able to reach an agreement with FGIC on the terms of the current proposal.
"We will continue with our strategy to acquire legacy financial guaranty insurance companies or their insured portfolios, as we have done previously," he said.
