(Adds Jefferson County guarantees starting in third paragraph.)
Nov. 15 (Bloomberg) -- Assured Guaranty Ltd., the only active municipal bond insurer, said it will reconsider guaranteeing public bonds in states without procedures for reviewing and approving local bankruptcy petitions after filings by Alabama’s Jefferson County and Harrisburg, Pennsylvania.
“Local governments must recognize their responsibilities to live up to the promises made by current and former duly elected officials,” Assured Chief Executive Officer Dominic Frederico said today on a conference call with investors and analysts. “The term full faith and credit must have meaning and challenges via bankruptcy or other legal maneuvers to negotiated contracts can’t be accepted.”
Assured backed $731.8 million of debt sold by Jefferson County, which last week filed the largest-ever U.S. municipal bankruptcy. The bond insurer also guaranteed or reinsured debt sold as part of an incinerator expansion in Harrisburg, where the city’s council voted to seek bankruptcy protection last month in a bid to ward off a state takeover.
Frederico said the Hamilton, Bermuda-based guarantor was “disappointed” with Jefferson County commissioners’ decision to file for Chapter 9 bankruptcy protection after a tentative deal struck in September that would have cut the amount owed on debt tied to the county’s sewer system failed. The deal “represents an excellent opportunity for all parties.”
Assured said in a regulatory filing yesterday that it expects paid losses of less than $19 million from the Jefferson County guarantees.
Frederico blamed “local politics” in Harrisburg for impeding “practical and fair solutions” to the city’s financial problems. Assured has $170.1 million of net exposure to Harrisburg and has paid $5.1 million in net claims to date, on which it said it expects a full recovery.
Editors: John Parry, Pierre Paulden
AGO US <EQUITY> CN <GO>
To contact the reporter on this story: Shannon D. Harrington in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Alan Goldstein at email@example.com