Behind 'bondholders' and 'creditors', names with which the public opinion has usually grouped all those who want to collect some debt of the government of Puerto Rico, there is a very specific interested party which up until now has been very secretive, and are the ones that have the most incentive to manipulate the negotiation, the litigation and the political process around the debt of the Island: the bond insurers.

While a 'bondholder' that bought at, $ 0.40 for example, can negotiate a payment from the government at $0.50 while still making a profit even if they do not get paid the full dollar, bond insurers need to argue so the government pays the debt wholly, without reductions or restructurings, because insurers are legally obligated to pay their insured bondholders the full dollar, regardless of whether the government says it can only pay half of that dollar.

In other words, the Government, the Fiscal Control Board (FCB) and bondholders can negotiate everything they want, but either way, the insurers are responsible for disbursing to the bondholders the total debt. These companies only get relief when the government pays the full debt because, anything less than that, costs them.

Insurers have challenged the legality of the certified Fiscal Plan and have also questioned the existence of the FCB, but also, according to reports of the financial market, have offered aid for Puerto Rico to return to the financial market.

How much can it cost them?

Using as guide the list of litigation that the FCB and the Government of Puerto Rico halted with the bankruptcy filing of the government last week, and the financial reports published by the insurers to the financial market, the most active players are:

1) Ambac Financial Group:

Reported an exposure of $9.7 billion in Puerto Rico debt, mainly of Cofina bonds.

The most active in congressional lobbying related to the Promesa Act, according to opensecrets.org registry.

Plaintiff in five of the eight disputes related to Promesa that were detained upon the filing of bankruptcy.

Their exposure to the Island's debt and the losses they have already incurred have led to internal problems, according to an investor class claim filed against the insurer in New York alleging that the company hid the seriousness of its problems with the debt of Puerto Rico. They add that two of their top executives have had to resign for their handling of Puerto Rico's debt.

2) Assured Guaranty

They have an exposure of $ 5.4 billion, mainly in bonds from General Obligations (GO), the Puerto Rico Electric Power Authority (Prepa) and Highways and Transportations Authority.

According to their public reports, they are negotiating with the Government and the Board.

They have two of the pending lawsuits against the Government and the Board on behalf of the insurers, and in one of them, they use as basis the inquiries made by Senators Thom Tillis and Tom Cotton on the debt. Upon answering these inquiries, the chairman of the Board and also businessman of the insurance world, José Carrión III, insinuated that the actions of the senators were motivated by pressure from creditors who were already negotiating. The letter also states that there is no more money for the payment of the debt other than the one already separated by the Fiscal Plan which adds approximately 24 cents of each dollar owed.

Assured has taken public positions against the search for solutions to the island's debt, other than full repayment. In 2015, when discussing the federal Treasury plan for a 'super bankruptcy,' Assured stated that 'there is no justification for initiatives that could undermine the rights and legal remedies that were the basis on which the bondholders agreed to provide capital for development of the island.' As recently as January of this year, when it was clear that the repayment of GO bonds would have to be weighed with the payments of the COFINA bonds, they said they hoped to achieve 'consensual restructuring agreements that respect constitutional, statutory, contractual and owner rights of creditors while supporting the economic recovery of the island.'

3) National Public Finance Guaranty / MBIA

They report having exposure for $4.1 billion in bonds, mainly from COFINA and Prepa.

They have a pending lawsuit and have reported they are negotiating with the Government and the Board.

They argue that the impact that the value of their business has received due to their link with the debt of Puerto Rico results from a 'perception trap' instead of a real risk on their finances.

4) Financial Guaranty Insurance Company

They reported an exposure of $ 1.9 billion, mainly in bonds of GO, ACT and the Authority for the Financing of Infrastructure.

See related documents below:

Ambac Puerto Rico Exposure - NotiCel_24847

Lawsuit of investors against Ambac_24848