While some investors flee Puerto Rico securities, a major bond insurer is still a buyer, the Wall Street Journal reported yesterday. Ambac Assurance Corp. has been aggressive this year in repurchasing distressed bonds that the company has guaranteed, said Chief Executive Claude LeBlanc said on an earnings call last week. The buybacks include municipal debt issued by Puerto Rico. Repurchasing bonds in the open market allows bond insurers to chip away at problematic exposures, provided the debt is cheap enough. Both Ambac and MBIA Inc. bought back Puerto Rico sales-tax bonds, known as COFINAs, after prices fell when the island’s former governor declared its debt unpayable in 2015. Now Ambac is accelerating its buyback strategy, doubling down last quarter on investments in its own securities, said Odeon Capital Group research analyst Andrew Gadlin. The company owns 16% of the $7.3 billion in COFINAs it guarantees, up from the $233 million it reported owning last year. The more insured debt that Ambac buys back, the easier it will be for the regulator to justify releasing the bad bank from court supervision, and the less likely policyholders at the good bank will object.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
