AGO still wants to Consolidate the industry
From the notes you can see below AGO plans on hanging tough against taking insured losses on Puerto Rico debt and more importantly still wants to consolidate all other municipal bond insurance cos.....see the last bullet point at the bottom
May 26, 2017
Assured Guaranty plans to defend its rights regarding insured exposure to Puerto Rico debt, sees being able to avoid the kind of outsized losses reflected in its equity valuation, BTIG’s Mark Palmer (buy, PT $49) writes in note after meeting AGO CEO Dominic Frederico, CFO Rob Bailenson.
• AGO reiterated 1Q conf. call comments about how it was glad Puerto Rico’s debt restructuring had reached the courts, as it liked its chances of seeing rights upheld in court; also:
- Emphasized it wouldn’t blink in the face of Puerto Rico’s efforts to force AGO to absorb haircuts on insured exposures
- Said combined exposures of AGO, MBIA, Ambac are big enough to stop efforts to force unpalatable plan on them
- While AGO would be willing to provide insurance to help Puerto Rico to regain capital market access if it’s treated well during the restructuring, would be out of the Commonwealth forever if forced to take a loss on insured exposures
- Successful outcome for creditors would require wholesale revision of fiscal plan certified by oversight board on March 13
• BTIG understands Puerto Rico oversight board will meet today, may decide whether to approve modified Restructuring Support Agreement (RSA) reached last month by Prepa, creditors; AGO said board was likely to sign off on the deal, may be implemented by year end (with last step being court validation of 3.1c/kWh surcharge to cover debt service on securitization bonds Prepa expects to issue)
• AGO also reiterated intent to consolidate all other municipal bond insurance cos.; since 2009 has acquired 3.25 of the 7 competitors it faced prior to financial crisis; remaining 3.75 competitors – Syncora, FGIC, AMBC, MBI still in their sights (counts MBI as .75 of a competitor as AGO had closed buy of MBIA UK Insurance in Jan.)
