Assured Guaranty files lawsuit against Puerto Rico

Bermuda-based financial guaranty insurance provider Assured Guaranty filed an adversary complaint against the Commonwealth of Puerto Rico, the financial oversight and management board for Puerto Rico (Oversight Board), Puerto Rico governor Ricardo Rosselló Nevares and others.

Assured Guaranty claims that the Oversight Board developed and approved a revised fiscal plan that violates the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) and the US Constitution.

“As a municipal bond insurer, Assured Guaranty has a long-term involvement in the bonds used to fund many Puerto Rico projects and shares a strong interest in the Commonwealth’s economic recovery,” said Assured Guaranty CEO Dominic Frederico. “For months, we have been asking that the Commonwealth and Oversight Board open constructive negotiations with creditors and stakeholders, but they have instead produced an unlawful fiscal plan, without creditor input, indicating they would rather litigate than engage in meaningful negotiations to develop a realistic solution,” Frederico said.

The revised fiscal plan allocates $1.5 billion for litigation and related expenses without providing for debt service, Assured Guaranty notes.

According to Assured Guaranty the revised fiscal plan’s violations include the failure to respect the relative lawful priorities and lawful liens established by the constitution, laws, and agreements of the Commonwealth.

Also, the plan fails to ensure that assets, funds, or resources of an agency are not transferred to or otherwise used for the benefit of other agencies, instrumentalities, or the Commonwealth. Furthermore, it fails to identify expenses for essential public services and to comply with the contracts, takings and due process clauses of the US Constitution.

Assured Guaranty is seeking a judgment declaring that the Revised Fiscal Plan is unlawful and unconstitutional.

“Assured Guaranty remains willing and ready to engage in constructive negotiations with the Commonwealth, the Oversight Board and other creditors and stakeholders to achieve a consensual agreement that gives Puerto Rico a path to long-term economic health,” Frederico said.

The adversary complaint was filed in the US District Court for the District of Puerto Rico. Other defendants named in the suit are the Puerto Rico Fiscal Agency and Financial Advisory Authority; Gerardo Portela Franco and Raúl Maldonado Gautier.

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