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The issuer pays an upfront premium to the insurance company, which agrees to insure the bonds as long as they are outstanding.
There is no refund if the issuer decides to retire its bonds prior to maturity.
Remember, the true value of the insurance to the issuer is the ability to borrow at a lower rate.
Is your article, “Puerto Rico Moves To Strengthen Bank, Defend New Law,” good news or bad news?
- M.B. Texas
Although many analysts believe the Puerto Rico Electric Power Authority is likely to move to restructure its debt, there is no consensus as to what form it will take, when it may happen or the affect it may have on other Puerto Rico entities.
Pending litigation challenging the new Recovery Act also makes the eventual outcome less predictable.
With regard to the fiscal situation in Puerto Rico, do you believe there will be any difference between Puerto Rico municipal bonds that are insured and those that are not?
Municipal market participants apply a clear and distinct premium to the value of insured Puerto Rico bonds.
The rating agencies have recently affirmed the ability of Assured Guaranty (AGM) and National Public Finance Guarantee Corporation to cover any claims arising from the default or restructuring of any Puerto Rico governmental entity.
This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.