Assured Guaranty Municipal Corp. and Assured Guaranty Corp., two bond insurance subsidiaries of Assured Guaranty Ltd. (NYSE:AGO) (together with its subsidiaries, Assured Guaranty or the Company), have voluntarily withdrawn without prejudice their lawsuit seeking the application by the Puerto Rico Electric Power Authority (PREPA) of pledged revenues to the payment of its bonds. The complaint, filed on August 7, 2017, asserted that PREPA's failure to remit revenues in accordance with the terms of sections 902, 922(d), and 928 of the Bankruptcy Code (Special Revenues Provisions) and the bond trust agreement violated the protections provided by the Special Revenues Provisions and the Takings and Due Process Clauses of the U.S. Constitution.
While the Company continues to believe that PREPA's failure to apply its pledged revenues to the payment of its revenue bonds over the past three years is inconsistent with the Special Revenues Provisions and violates the U.S. Constitution, PREPA's focus right now should be on restoration of the power grid damaged by Hurricane Maria. This is not an appropriate time to be litigating these issues while continued emergency efforts are needed to restore electricity to the island's residents and businesses. Given these circumstances, Assured Guaranty, together with other PREPA creditors, has voluntarily decided to withdraw its complaint without prejudice at this time.
"We urge the Oversight Board and PREPA to take this opportunity to work collaboratively with creditors, as we did previously, to produce a comprehensive reconstruction plan that ensures power is restored in Puerto Rico as soon as possible and that PREPA moves forward with a workable long-term development plan consensually with all stakeholders," said Dominic Frederico, President and CEO of Assured Guaranty.
Under applicable law, the Company is permitted to refile the lawsuit. Should PREPA fail to resume timely payment of its bonds, in accordance with the terms of the Special Revenues Provisions, after restoration of the electric system, the Company will consider refiling this lawsuit at an appropriate time.
