Detroit agreed to pay some bondholders about 74 percent of the $388 million they are owed in a deal that shifts $100 million to city pension funds and lightens the burden on insurers that backed the debt.
Buyers of debt issued by bankrupt Detroit or junk-rated Puerto Rico are finding it pays to have bond insurance. The backing is even more valuable after upgrades of units of Assured Guaranty Ltd. and MBIA Inc.
Royal Bank of Scotland Group Plc, Britain’s biggest taxpayer-owned lender, must face a lawsuit by a bond insurer over what it claims was the bank’s sale of $1.15 billion of securities backed by “thousands of defective and fraudulently originated” home loans.
Puerto Rico’s financial distress underscores the renaissance of Assured Guaranty Ltd., the bond insurer brought back from near-death after the financial crisis with the help of billionaire investor Wilbur Ross.
Assured Guaranty Ltd., the municipal-bond insurer whose biggest investor is billionaire Wilbur Ross, said its credit downgrade by Moody’s Investors Service was unjustified and showed a “serious flaw” in the company’s rating process.