Tap to Call - (877) 250-8242

Bond Insurer Reconsiders Its Policy on States Lacking Bankruptcy Review

November 28, 2011

Share this article

SHARE

By:

Recent municipal bankruptcy filings have led the nation’s only municipal bond insurer, Assured Guaranty Ltd., to think twice about its policies for states that don’t have any provisions in place for reviewing municipal bankruptcy filings.

Recent municipal bankruptcies in Harrisburg, Pennsylvania, and Jefferson County, Alabama, may be part of a larger trend, some analysts think. Indeed, Vallejo, California, only recently emerged from Chapter 9 bankruptcy, after filing its petition in 2008.

In Pennsylvania, the state may not ultimately permit its capital’s bankruptcy declaration to go through; later this month, a judge will hear arguments both for and against the city’s bankruptcy. Elsewhere in the nation, though, cities can file for bankruptcy without outside review. Such review-free policies, claims Assured, are not conducive to its business practices.

When municipalities are free to discharge or even rearrange debts in bankruptcy, the value of its bonds could plummet significantly, leaving Assured on the hook to pay out. As with other types of insurance, public bond insurance is essentially a bet that the majority of such bonds will perform well and the profits from those high-performing bonds will offset losses from others.

But Assured had significant exposure in to both Harrisburg’s and Jefferson County’s debts. Considering Jefferson County’s is the biggest municipal bankruptcy in the U.S. to date, that could translate to serious losses for Assured.

The insurer’s reaction doesn’t seem to be excessively extreme, given the recent municipal debt climate. In addition to the two well-publicized actual municipal bankruptcy filings in recent months, there have been murmurings about other cities on the brink of bankruptcy or considering bankruptcy down the road.

Just months before Harrisburg’s bankruptcy, yet another municipality (Central Falls, Rhode Island) entered the protection of the bankruptcy court. Indeed, the move toward bankruptcy as a means of easing cities’ debts seems to be more of a trend than a fluke at this point.

As of now, it remains unclear what specific restrictions Assured will put on its insurance process, or what criteria it will use to determine when to offer municipal bond insurance, if it chooses to take that route at all.

 


Back to Newspaper Home


Tap to Call - (877) 250-8242

PAID ATTORNEY ADVERTISEMENT: THIS WEB SITE IS A GROUP ADVERTISEMENT AND THE PARTICIPATING ATTORNEYS ARE INCLUDED BECAUSE THEY PAY AN ADVERTISING FEE. It is not a lawyer referral service or prepaid legal services plan. Total Bankruptcy is not a law firm. Your request for contact will be forwarded to the local lawyer who has paid to advertise in the ZIP code you provide. Total Bankruptcy does not endorse or recommend any lawyer or law firm who participates in the network nor does it analyze a person's legal situation when determining which participating lawyers receive a person's inquiry. It does not make any representation and has not made any judgment as to the qualifications, expertise or credentials of any participating lawyer. No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers. The information contained herein is not legal advice. Any information you submit to Total Bankruptcy does not create an attorney-client relationship and may not be protected by attorney-client privilege. Do not use the form to submit confidential, time-sensitive, or privileged information. All photos are of models and do not depict clients. All case evaluations are performed by participating attorneys. An attorney responsible for the content of this Site is Kevin W. Chern, Esq., licensed in Illinois with offices at 25 East Washington, Suite 400, Chicago, Illinois 60602. To see the attorney in your area who is responsible for this advertisement, please click here, or call 866-200-8052.

FLORIDA ONLY: Total Bankruptcy is considered a lawyer referral service in the state of Florida under the Florida Rules of Professional Conduct. By all other standards, Total Bankruptcy is a group advertisement and not a lawyer referral service.

If you live in Mississippi, Missouri, New York or Wyoming, please click here for additional information.

By an Act of Congress and the President of the United States, we are a federal Debt Relief Agency. Attorneys and/or law firms promoted through this Web site are also federally designated Debt Relief Agencies. They help people file for relief under the U.S. Bankruptcy Code. Disclosures Required Under the U.S. Bankruptcy Code.