N.Y. Dept. OKs Bond Insurer Syncora Restructuring Plan

NU Online News Service, July 17, 4:00 p.m. EDT

The New York State Insurance Department said it has approved the restructuring of bond insurer Syncora Guarantee Inc., enabling it to proceed with transactions that will transform a nearly $4 billion deficit into a $180 million surplus.

According to a department statement, the agreement provides reinsurance for Syncora's municipal bond business through a "newly formed, well-capitalized subsidiary" called Syncora Capital Assurance Inc.

The restructuring also includes a $1.2 billion commutation payment to policyholders who entered into credit default swaps on collateralized debt obligations on asset-backed securities, the department said.

Additionally, Syncora's mortgage-backed security liabilities are reduced through a "voluntary tender process that offered upfront cash payments to policyholders in exchange for their insurance claims." The department said nearly 70 percent of the tender offers were accepted.

"This agreement protects municipal bond and other policyholders and permits the reduction of company liabilities in a fair and equitable manner," Acting Insurance Superintendent Kermitt Brooks said. "The agreement also enables the company to avoid receivership and the disruption that it would cause."

The department said it has helped develop individual solutions to stabilize each of the major bond insurers, including Syncora, MBIA, FGIC, FSA and CIFG, and to attract new capital into the market with the licensing of Berkshire Hathaway Assurance Corporation and Municipal and Infrastructure Assurance Corporation.