Some Wall street commentary:
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Notably, Net Par Outstanding at SCAI continued to significantly decline. During the quarter, NPO decreased by $2.2B (14.3%) to $12.9B. Over the past 12 months, SCAI's NPO has declined by $7.7B as (primarily) municipal exposures have rolled off the books. Exposures at SGI declined as well, but not nearly as rapidly. At quarter-end, SGI had $5.1B in NPO (down 3.6% vs. 12/31/16).
In our view, Syncora's Puerto Rican risk remained limited with (i) SGI having $101mm of GO, GO Guaranteed and PREPA net par exposure and (ii) SCAI having $237.5mm of PREPA, GO and HTA net par exposure. We believe that Syncora's PR exposure is manageable and the Company's reserves are (relatively) in-line with current trading levels.
SGI's "mismatch" disclosures (which relate to the Reliance Rail transactions) increased over the most recent quarter from $121.5mm at 12/31/16 to $188mm at 3/31/17. However, the aggregate par exposure with refinancing risk through 2019 declined from $1.9B to $1.6B during Q1. We continue to feel that reserves in our model adequately reflect these risks.
Based on the Q1 results, we continue to believe that the Surplus Notes and ARPS at SGI are more than fully covered - with total surplus after the ARPS increasing slightly.
Following the end of the quarter, litigation against Macquarie related to American Roads progressed incrementally, with the court largely denying Macquarie's motion to dismiss. While this decision has been appealed, the next significant dates in the state court case are June 28th and September 5th when the motion for Summary Judgement and Summary Judgement Answer are due.
Our litigation recovery estimate and valuation for the American Roads assets (which the Company has described as "non-core") may prove too conservative in the event of a sale (as they are largely based upon a 2013 bankruptcy valuation analysis).
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AI
