Assured Guaranty files new Puerto Rico lawsuit
Assured Guaranty Corp. and Assured Guaranty Municipal Corp., two bond insurance subsidiaries of Assured Guaranty, have filed a new lawsuit against the Government of Puerto Rico.
The lawsuit is 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.
In the filing Assured Guaranty asserts the Oversight Board developed and approved a Revised Fiscal Plan that, on its face, violates the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) and the United States 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. 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,” said Assured Guaranty president and chief executive officer Dominic Frederico. The Revised Fiscal Plan allocates $1.5 billion for litigation and related expenses without providing for debt service.
Assured Guaranty said that the Revised Fiscal Plan’s violations include: failure to respect the relative lawful priorities and lawful liens established by the constitution, laws, and agreements of the Commonwealth, as required by PROMESA §201(b)(1)(N); failure 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, as required by PROMESA § 201(b)(1)(M); failure to identify expenses for essential public services, as required by PROMESA § 201(b)(1)(B); failure to comply with Sections 303 and 928 of PROMESA; and failure to comply with the Contracts, Takings and Due Process Clauses of the United States Constitution.
Because of what it described as these “clear violations”, Assured Guaranty said that it is seeking a judgment declaring that the Revised Fiscal Plan is unlawful and unconstitutional, and that the Oversight Board cannot use it as the basis for proposing a plan of adjustment in the pending Title III case for the Commonwealth. Review of the Revised Fiscal Plan at this juncture is necessary to prevent the ongoing violations of PROMESA and the United States Constitution. To the extent necessary, the Court should grant complementary injunctive relief.
According to Assured Guaranty Puerto Rico’s long-term economic sustainability depends on future investment and access to capital markets, and investors will not be willing to make those investments if previous agreements are not honoured. The latest budget estimates show that ample funds are available for both essential public services and debt repayment.
Assured Guaranty believes Puerto Rico’s recovery is only possible with the creation of fiscal plans that comply with PROMESA and the constitutions and laws of Puerto Rico and the United States, make possible future capital market access by reassuring investors and, most importantly, assure a sustainable economic future for the people of Puerto Rico.
“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,” said Frederico.
