Financial Security Assurance (FSA) announced the expiration, as of
today, of confidentiality agreements between certain holders of bonds ("Participating
Bondholders") issued by Metronet Rail BCV
(BCV) and Metronet Rail SSL (SSL) and FSA and Ambac Assurance UK Limited
(the "Monolines").
As previously announced on February 13, 2008, funds paid by London
Underground Ltd (LUL) in respect of the put option price on bonds issued
by BCV and SSL are being held in escrow and are available to meet debt
service and other amounts due in accordance with the Bond Trust Deed
escrow agreements and other relevant documentation.
Triple-A rated FSA insures £193 million gross
(£93 million net of amounts reinsured) of
index-linked bonds issued by BCV and £350
million gross (£170 million net of amounts
reinsured) of fixed-rate bonds issued by SSL. The BCV bonds are indexed
every six months, which affects the gross and net amounts. The debt was
issued under Public Private Partnership (PPP) contracts to finance the
operation, maintenance and the initial phase of asset upgrades for part
of the London Underground.
Under the applicable PPP contracts, insured bondholders and other senior
creditors including commercial banks and the EIB benefit from an "Underpinned
Amount" providing support from LUL. With
respect to the FSA-insured BCV and SSL bonds, the sum of £619
million has been segregated through deposit into two separate escrow
accounts opened in the joint names of FSA and Deutsche Trustee Company
Limited (Deutsche) at Citibank, N.A., London Branch. Deutsche is the
Bond Trustee under the Bond Trust Deed governing the BCV and SSL bonds.
Within the confidentiality arrangements, the Participating Bondholders
and the Monolines discussed various options relating to the application
of funds currently standing to the credit of the escrow accounts
relating to the bonds (the "Escrow Amounts").
The documentation relating to the bonds does not clearly set out how the
Escrow Amounts should be applied. Escrow Amounts are currently being
used to pay scheduled interest and principal. The Monolines and the
Participating Bondholders have been discussing other possible
applications of the Escrow Amounts, including: 1.) collateral management
(purchase of a suitable investment portfolio); or 2.) a tender offer; or
3.) acceleration of the Bonds at par.
These discussions have not yet reached a conclusion. The Monolines will
continue to work towards a decision regarding the application of the
Escrow Amounts.
The funds held in escrow are available to meet debt service guaranteed
by FSA and other amounts due in accordance with the Bond Trust Deed, the
escrow agreement and other relevant documentation. While in escrow, the
funds will be invested in UK government securities, entities which
invest solely in UK government securities, any short term instruments or
deposits with a rating of A-1 or better by S&P and P-1 or better by Moody´s
or other investments as agreed by FSA and the Bond Trustee.
As is typical for insured transactions that experience an event of
default, FSA has the right to direct that the funds held in escrow be
used either to continue to meet debt service as scheduled or to fund the
acceleration and immediate payment of all principal and interest due.
FSA´s unconditional and irrevocable Triple-A
guaranty remains in full force and effect.
THE COMPANY
Financial Security Assurance Holdings Ltd. (the Company), headquartered
in New York City, is a holding company whose affiliates provide
financial guarantees and financial products to clients in both the
public and private sectors around the world. The principal operating
subsidiary, Financial Security Assurance Inc. (FSA), a leading guarantor
of public finance and asset-backed obligations, has been assigned
Triple-A ratings, the highest ratings available, from Fitch Ratings
Moody´s Investors Service, Inc., Standard &
Poor´s Ratings Services and Rating and
Investment Information, Inc. Through other subsidiaries, the Company
provides FSA-insured financial products, such as guaranteed investment
contracts, to obtain funds at Triple-A cost and then invests those funds
in high-quality, liquid securities. The Company is a member of the Dexia
group.
FORWARD-LOOKING STATEMENTS
The Company relies on the safe harbor for forward-looking statements
provided by the Private Securities Litigation Reform Act of 1995. This
safe harbor requires that the Company specify important factors that
could cause actual results to differ materially from those contained in
forward-looking statements made by or on behalf of the Company.
Accordingly, forward-looking statements by the Company and its
affiliates are qualified by reference to the following cautionary
statements.
In its filings with the SEC, reports to shareholders, press releases and
other written and oral communications, the Company from time to time
makes forward-looking statements. Such forward-looking statements
include, but are not limited to:
projections of revenues, income (or loss), earnings (or loss) per
share, dividends, market share or other financial forecasts;
statements of plans, objectives or goals of the Company or its
management, including those related to growth in adjusted book value
or return on equity; and
expected losses on, and adequacy of loss reserves for, insured
transactions.
Words such as "believes," "anticipates," "expects," "intends" and "plans" and future and conditional verbs such as "will," "should," "would," "could" and "may" and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such
statements.
The Company cautions that a number of important factors could cause
actual results to differ materially from the plans, objectives
expectations, estimates and intentions expressed in forward-looking
statements made by the Company. These factors include:
changes in capital requirements or other criteria of securities rating
agencies applicable to FSA;
competitive forces, including the conduct of other financial guaranty
insurers;
changes in domestic or foreign laws or regulations applicable to the
Company, its competitors or its clients;
changes in accounting principles or practices that may result in a
decline in securitization transactions or affect the Company´s
reported financial results;
an economic downturn or other economic conditions (such as a rising
interest rate environment) adversely affecting transactions insured by
FSA or its investment portfolio;
inadequacy of reserves established by the Company for losses and loss
adjustment expenses;
disruptions in cash flow on FSA-insured structured transactions
attributable to legal challenges to such structures;
downgrade or default of one or more of FSA´s reinsurers;
market conditions, including the credit quality and market pricing of
securities issued;
capacity limitations that may impair investor appetite for FSA-insured
obligations;
market spreads and pricing on insured CDS exposures, which may result
in gain or loss due to mark-to-market accounting requirements;
prepayment speeds on FSA-insured asset-backed securities and other
factors that may influence the amount of installment premiums paid to
FSA; and
other factors, most of which are beyond the Company´s
control.
The Company cautions that the foregoing list of important factors is not
exhaustive. In any event, such forward-looking statements made by the
Company speak only as of the date on which they are made, and the
Company does not undertake any obligation to update or revise such
statements as a result of new information, future events or otherwise.
