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Assured Guaranty asks FOMB to reconsider certification of Fiscal Plan for Puerto Rico

By on May 16, 2018

The head of Assured Guaranty Corp. and Assured Guaranty Municipal Corp., is asking the Financial Oversight and Management Board (FOMB) to reconsider its certification of the commonwealth fiscal plan.

The firm insures about $1.6 billion of commonwealth general obligation bonds and about $1.9 billion of revenue bonds issued by other entities including the Highway and Transportation Authority, Cofina and the University of Puerto Rico.

On October 6 of last year, Assured withdrew a lawsuit othe legality of the the fiscal plan the Oversight Board approved on March 13 of 2017 that at the time the monoliner said violated the Puerto Rico Oversight, Management, and Economic Stability Act among other laws.

“Assured withdrew its lawsuit because it had been led to believe that the Oversight Board sought to “reset” its relations with Puerto Rico’s creditors and that the Original Fiscal Plan would be redrafted. Assured hoped that this “reset” would entail a more open fiscal plan development process aimed at producing a constitutional and Promesa-compliant fiscal plan benefitting from the input and support of creditors,” stated the letter written by Dominic J. Frederico, president and CEO of Assured.

“Unfortunately, the Oversight Board again formulated a fiscal plan without appropriate transparency of information and assumptions, and without collaboration with creditors,” he added in the letter dated Tuesday.

He said the fiscal plan approved on April 19 of this year violates Promesa.

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First, he said, the new fiscal plan does not respect lawful priorities and lawful liens in that it prioritizes general government expenditures instead of debt payments. It also violates Promesa dispositions that prevent the transfer of resources from one entity to another. The plan diverts revenues from the Highway and Transportation Authority, the Convention Center and the Infrastructure Financing Authority that were used to pay debt, to the commonwealth general fund.

The Fiscal plan also does not identify essential services and does not provide for a method to access capital markets.

“In addition to these legal defects, the Revised Fiscal Plan suffers from flawed methodologies and assumptions that result in an artificially pessimistic projection of Puerto Rico’s future revenues,” the firm said.

The Revised Fiscal Plan also suffers, he said, from the ongoing lack of up-to-date audited financial statements or other public information sufficient to develop or assess a realistic fiscal plan.

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