Two bond insurance subsidiaries of Assured Guaranty, Assured Guaranty Municipal and Assured Guaranty Corp, have filed a motion and form of complaint at the Federal District Court in Puerto Rico seeking the relief from the stay provided by the Puerto Rico Oversight, Management, Economic Stability Act (PROMESA).
The motion and form of complaint challenged the Commonwealth of Puerto Rico’s Executive Orders diverting pledged toll revenue collateral that secures the payment of bonds issued by the Puerto Rico Highways and Transportation Authority (PRHTA).
The PRHTA toll revenues are not subject to clawback for payment of the Commonwealth’s general obligation debt under the Puerto Rico Constitution.
The lawsuit, upon a grant of relief from the PROMESA stay, further seeks a declaration that the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act (Moratorium Act) is pre-empted by Federal bankruptcy law and that the Executive Orders diverting the pledged toll revenues are pre-empted by PROMESA and violate the US Constitution.
The lawsuit also seeks damages for the value of toll revenues diverted and injunctive relief prohibiting the defendants from taking any further action under the executive orders.
Assured Guaranty, with this action, is seeking to protect the lien on the pledged toll revenues that secures the payment of PRHTA bonds, which the Commonwealth had already invaded under the purported authority of the Moratorium Act.
Assiured Guaranty said that the Commonwealth, unjustifiably through its Executive Orders, is intent on using pledged toll revenues to fund so-called ‘essential services’ payments to the Government Development Bank for Puerto Rico, which is a deeply subordinated, affiliated, insider creditor of PRHTA, and to other contractually subordinated PRHTA expenses prior to the payment of senior secured PRHTA bonds.
Assured Guaranty is determined to take reasonable and necessary actions to protect its legal rights as an insurer of PRHTA in light of the Commonwealth’s unlawful conduct.
Despite this legal dispute, Assured Guaranty has said it stands ready to work constructively with its insured Puerto Rico credits and the PROMESA oversight board to address the Commonwealth’s financial and liquidity challenges.
According to Assured Guaranty, investors owning Puerto Rico-related bonds will continue to receive uninterrupted full and timely payment of scheduled debt service in accordance with the terms of Assured Guaranty’s insurance policies.
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