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| 8-K - 8-K POTENTIAL FGIC TRANSACTION - ASSURED GUARANTY LTD | fgicpotentialtransaction8k.htm |
KL2 2975844.16
THE INSTITUTIONS LISTED ON EXHIBIT A
September 27, 2016
Assured Guaranty Corp.
1633 Broadway
New York, NY 10019
Attn: Mr. David A. Buzen
Dear David:
This letter will memorialize the indicative, non-binding terms regarding a potential commutation and
reinsurance transaction (the “Transaction”) involving Financial Guaranty Insurance Company (“FGIC”),
as agreed in principle by Assured Guaranty Corp. (together with its subsidiaries or affiliates, as
appropriate, “AGC” or “you”) and the undersigned firms, identified on Exhibit A hereto (“we” or “us”).
Each of us is a record or beneficial holder (or a provider of investment management or advisory services
on behalf of such holder(s)) of certain FGIC Interests. A “FGIC Interest” is an existing DPO (as defined
herein); an in-force insurance policy issued by FGIC under which claims have been made but capacity
still remains for future losses; an in-force insurance policy issued by FGIC under which no claims have
been made; and/or any interest in the foregoing. A holder of a FGIC Interest is referred to as a “FGIC
Interest Holder.” You and we agree that AGC (or any affiliate identified herein) may assign its rights and
obligations under any agreement identified herein to any affiliate, provided that the affiliate must have a
financial strength rating at least as high as the transferring AGC entity.
Under the transaction, generally,
FGIC Interest Holders within FGIC’s distressed insured exposure portfolio (specifically, FGIC
Interests in connection with RMBS Obligations, PR Obligations and Detroit Obligations, each as
defined below, provided, however, that based on AGC’s due diligence, additional liabilities, not
to exceed $25 million in initial required reserves, may need to be classified as part of FGIC’s
distressed insured exposure portfolio (“Additional Distressed Obligations”), and such liabilities
will be so added within 30 days of FGIC providing sufficient access to its book and records to
enable AGC to evaluate FGIC’s liabilities (the “Distressed Portfolio”)) will commute or cause to
be commuted their FGIC Interests in exchange for, in the aggregate, for all such FGIC Interest
Holders, (i) all Distributable Cash (defined below) plus (ii) newly issued surplus notes, deferred
payment obligations or similar instruments (“Surplus Notes”) representing the rights to 80% of
Future Recoveries (defined herein);
AGC will provide 100% quota-share reinsurance coverage on FGIC’s non-distressed insured
exposure portfolio;
AGC will provide excess-of-loss coverage, for losses in excess of FGIC’s negotiated reserve
requirements, for policy coverage remaining under non-commuting FGIC Interests in the
Distressed Portfolio (the “Remaining Distressed Portfolio”);
AGC will be entitled to consideration comprising a $281,500,000 reinsurance premium, net of a
ceding commission of $56,500,000 (i.e., $225,000,000, which is referred to herein as the “Net
Reinsurance Consideration”) and Surplus Notes representing the rights to 20% of Future
Recoveries;
Exhibit 99.1
Cleansing Materials
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at the Effective Date (defined herein) immediately after giving effect to the transaction, FGIC
shall retain at least $100,000,000 in capital, including at least $33,000,000 expected to be retained
by FGIC UK Limited (“FGIC UK”), after FGIC pays such consideration and the Transaction
Expenses (as defined below); and
AGC will enter into a management agreement with FGIC to manage FGIC and FGIC UK.
“Future Recoveries” means all distributable income, earnings and other amounts collected by, and all
assets held by, FGIC from and after the Effective Date until the repayment in full of the Surplus Notes,
including without limitation litigation proceeds; Reserve Releases (defined herein); and the proceeds of
any sale of, or distributions from, FGIC UK.
“Distributable Cash” means all cash and other liquid assets remaining in FGIC on the Effective Date
following the payment of the Net Reinsurance Consideration to AGC and the required capital and
reserves contemplated herein. You and we intend to maximize the amount of Distributable Cash to the
extent practicable by having FGIC sell or otherwise monetize assets on or prior to the Effective Date. As
shown in Exhibit B, the illustrative commutation transaction is expected to result in at least $1.95 billion
of Distributable Cash for commuting FGIC Interest Holders, although the amount could be more if you
and we are successful in monetizing additional FGIC assets at the Effective Date.
You and we agree that the ideal transaction is one in which 100% of FGIC Interest Holders participate,
and, based on our current holdings and our discussions with other FGIC Interest Holders, that is our
present expectation. However, it is assumed herein, and it is a minimum requirement for pursuing a
transaction, that at least 90% of the insured exposure related to RMBS Obligations and PR Obligations in
the aggregate, 100% of outstanding DPOs (including DPO Accretion, as defined herein) arising under
FGIC’s coverage of Detroit municipal obligations (“Detroit Obligations”) and at least 90% of all other
outstanding DPOs (including DPO Accretion) in the Distressed Portfolio are commuted pursuant to the
transaction.
The transaction will be effectuated pursuant to an amendment (the “Plan Amendment”) to FGIC’s First
Amended Plan of Rehabilitation for FGIC dated June 4, 2013, together with all exhibits and the Plan
Supplement thereto (the “Plan”), to be sought by the New York State Superintendent of Financial
Services (the “Superintendent”), in her capacity as rehabilitator of FGIC, in a proceeding in New York
State Supreme Court. It is contemplated that you and we will, upon the execution of this letter, approach
FGIC and the New York State Department of Financial Services to solicit their support for the transaction
and to induce them to take all appropriate measures to seek such Plan Amendment in order to effectuate
the transaction.
Wherever this letter refers to commutation of a FGIC Interest, the property right being surrendered to
FGIC is insurance coverage provided by FGIC or a claim on FGIC for the DPO payment, as the case may
be, not the underlying obligation insured by FGIC. The commuting FGIC Interest Holder will continue to
hold such obligation post-commutation, but without the FGIC Interest. This may be accomplished
through a “synthetic commutation”, if necessary.
Exhibit B hereto sets forth FGIC’s balance sheet as of a June 30, 2016, adjustments in respect of an
illustrative commutation transaction and the resulting pro forma balance sheet giving effect to such
adjustments, showing the assets and liabilities remaining in FGIC and the aggregate distributions to
commuting FGIC Interest Holders.
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Exhibits C and D hereto set forth schedules showing, based on current information available to you and
us as of today’s date, FGIC’s initial required reserves on PR Obligations (defined herein) as contemplated
hereby and FGIC’s initial required reserves as contemplated hereby on its exposure to RMBS
Obligations, respectively, immediately prior to giving effect to the Commutation. These exhibits are
subject to change as you and we receive additional and updated information.
Exhibit E hereto shows all securities as to which FGIC insurance coverage in the Distressed Portfolio
attaches and therefore which could be included in the XOL Agreement (defined herein).
Exhibits B through E are subject to being updated by you and us as more current information becomes
available.
“DPO” has the meaning ascribed to it in the Plan.
“DPO Accretion” has the meaning ascribed to it in the Plan.
Under the transaction and pursuant to the Plan Amendment, subject to the satisfaction of all closing
conditions, the transaction will be effectuated as described below on a date agreed by the parties (the
“Effective Date”) pursuant to a master transaction agreement.
1. Commutation. FGIC Interest Holders within the Distressed Portfolio will commute or cause to
be commuted their coverage or DPOs (as the case may be) in exchange for all Distributable Cash
and Surplus Notes as set forth herein (the “Commutation”). Upon the Effective Date, FGIC will
not be entitled to any further reimbursements or subrogation rights arising from payments it has
made on insured obligations or payments made by FGIC in respect of commuting FGIC Interests,
with such exceptions, if any, as may be mutually agreed by you and us in order for FGIC to
preserve litigation rights to be able collect Future Recoveries. The Commutation may be
accomplished through a structured transaction that has the same economic effect as a
commutation by an individual FGIC Interest Holder (i.e., a “synthetic commutation”).
2. Reinsurance of Non-Distressed Portfolio. FGIC will cede to AGC a 100% quota share of
FGIC’s in-force policies other than those in the Distressed Portfolio. AGC will be permitted to
seek novation of all such policies following the Effective Date in its discretion and at its expense.
3. Excess of Loss Cover for Remaining Distressed Portfolio. FGIC will cede to AGC (x) all
losses, and (y) loss adjustment expense for (i) RMBS Obligations other than litigation costs and
(ii) PR Obligations and Additional Distressed Obligations (and excluding loss adjustment
expense for litigation costs related to RMBS Obligations) (“Ceded LAE”), on the Remaining
Distressed Portfolio exceeding an attachment point that will adjust from time to time as described
herein (the “XOL Agreement”), as will be illustrated on a mutually agreed Effective Date pro
forma balance sheet.
a. The initial attachment point will
i. be agreed by you and the FGIC Interest Holders participating in the
Commutation;
ii. represent an amount of reserves exceeding FGIC’s statutory-basis (“SAP”) claim
reserve in respect of the Remaining Distressed Portfolio as of the Effective Date
and the amount of Ceded LAE as of the Effective Date;
iii. in the case of exposures on obligations of the Commonwealth of Puerto Rico and
its territorial instrumentalities (“PR Obligations”), be set at the level as shown in
Exhibit C, after adjusting such level to give effect to the Commutation; and
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iv. in the case of exposures on residential mortgage-backed securities (“RMBS
Obligations”), be set using a discount rate equal to the zero-coupon swap forward
curve plus 100 basis points (the “RMBS Discount Rate”).
b. You and we agree that this initial attachment point, or amount of reserves, is more
conservative than warranted under SAP and expect releases of these reserves over time.
The attachment point will be adjusted downward from time to time, as described in
Paragraph 7 below, as the Remaining Distressed Portfolio runs off. For the avoidance of
doubt, the attachment point will not be eroded by loss adjustment expenses other than
Ceded LAE.
4. Reinsurance Consideration Payable to AGC. AGC will be entitled to
a. The Net Reinsurance Consideration from FGIC payable on the Effective Date; and
b. Surplus Notes representing the 20% of all Future Recoveries.
5. Application of All Collections to Future Recoveries. AGC will bear the risk of any losses in
excess of the attachment point on the Remaining Distressed Portfolio even if FGIC’s other
current reserves held at a given time are less than the attachment point in effect at that time. For
the avoidance of doubt, FGIC’s reserves and capital levels will be determined assuming that
recoveries will be available to pay losses. Premium income, investment income and litigation
proceeds will not be used to pay losses and will instead be applied to Future Recoveries.
6. Reserve Calculations. AGC will perform Reserve Calculations in accordance with the time
periods set forth below, but in each case after FGIC’s statutory financial statement is filed but in
any case not later than June 30 of the applicable year, as follows. “Reserve Calculation” means a
calculation of FGIC’s SAP claim reserve associated with specified business, determined in
accordance with AGC’s then-current methodology for establishing SAP reserves for its own
portfolio (“AGC Reserve Methodology”), as modified by (i) in respect of RMBS Obligations, the
methodology described in Subparagraph 6.a below and (ii) in respect of PR Obligations, the
methodology described in Subparagraph 6.b below.
a. Annually in accordance with the AGC Reserve Methodology, AGC will perform a
Reserve Calculation on the RMBS Obligations and Additional Distressed Obligations.
Until the fifth anniversary of the Effective Date, such Reserve Calculation shall, as to
RMBS Obligations, be performed using the RMBS Discount Rate and shall include a
reserve in excess of SAP reserves equal to the excess reserve in effect prior to such
Reserve Calculation reduced proportionately by the same percentage that the SAP
reserves are reduced in such Reserve Calculation. Beginning as of the fifth anniversary
of the Effective Date, such Reserve Calculation shall be performed using the AGC
Reserve Methodology, but at no time will reserves exceed the amount of reserves prior to
such Reserve Calculation.
b. Beginning as of the fifth anniversary of the Effective Date (and annually thereafter in
accordance with the AGC Reserve Methodology), AGC will perform a Reserve
Calculation on the PR Obligations, provided that a Reserve Calculation on the PR
Obligations will also be performed as of any date, whether prior to or following the fifth
anniversary, on which (i) amounts are recovered on, and FGIC’s insured exposure
decreases in respect of, PR Obligations, triggering a release of reserves on such
obligations or (ii) a restructuring of PR Obligations is effectuated, reducing the insured
obligations, by a court order that has become a final order, but in each case only with
respect to the applicable PR Obligations.
7. Reserve Releases and Attachment Point Reset. Reserves will be released as follows.
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a. To the extent that a Reserve Calculation results in a required reserve less than the (i)
required reserves for the relevant business on the Effective Date minus (ii) the cumulative
reserve releases for the relevant business as determined immediately prior to such
Reserve Calculation, redundant reserves will be released, provided that the reserve on any
PR Obligation that is repaid by the obligor at maturity will automatically be released,
provided, further, that the aggregate amount of redundant reserves released for the
relevant business shall not exceed the required reserves for the relevant business on the
Effective Date (a “Reserve Release”).
b. Upon a Reserve Release or other collection of a Future Recovery, subject to non-
disapproval by the Superintendent, following notice to the Superintendent, a distribution
on the Surplus Notes will become payable, provided that FGIC shall not be required to
give such notice any more frequently than annually, and any application will give effect
to any prior Reserve Releases that have accumulated but have not yet been distributed.
Upon a Reserve Release, the attachment point under the XOL Agreement will
automatically reset to reflect the new level of reserves.
c. To the extent that any Reserve Calculation results in a required reserve higher than the
amount reserved at that time, the attachment point will not reset and no approval for
payment under the Surplus Notes will be sought from the Superintendent.
8. Surplus Notes.
a. The Surplus Notes issued to the FGIC Interest Holders will entitle the holders to 80% of
all Future Recoveries. The FGIC Interest Holders’ Surplus Notes will not be subject to
transfer restrictions. It is contemplated that these Surplus Notes will be tradable and will
be exempt from registration requirements under the securities laws pursuant to Section
3(a)(10) of the Securities Act of 1933, as amended.
b. The Surplus Notes issued to AGC will entitle AGC to 20% of all Future Recoveries.
AGC’s Surplus Notes will not be transferable (other than to an affiliate) without the
written consent of the holders of 66-2/3% of the Surplus Notes held by the FGIC Interest
Holders who affirmatively participate in such determination, their successors or assigns
(as determined based on the then-outstanding face amount of the Surplus Notes).
c. The aggregate principal amount of all Surplus Notes on the Effective Date will be such
that 80% of the aggregate principal will equal (i) 100% of the net present value of
projected claims minus cash payments made in the Commutation in respect of
commuting policy coverage plus (ii) 100% of the face amount of commuted DPOs (plus
unpaid DPO Accretion accrued through the Effective Date) minus cash payments made in
the Commutation in respect of commuting DPOs.
d. The Surplus Notes held by AGC will be pari passu with those issued to the commuting
FGIC Interest Holders, and no distribution on the Surplus Notes will be made to AGC or
the commuting FGIC Interest Holders (or their transferees) without a ratably equivalent
distribution being made concurrently to the commuting FGIC Interest Holders (or their
transferees) or AGC, as the case may be.
e. There shall be no distributions on the Surplus Notes in the absence of non-disapproval
from the Superintendent following notice.
9. Management Agreement. On the Effective Date, AGC and FGIC will enter into a management
agreement pursuant to which AGC will provide all management and administrative services to
FGIC in consideration for an annual management fee of $7,500,000. AGC will bear all operating
expenses of FGIC. FGIC will bear all expenses other than those related to the management of the
assets and liabilities of FGIC, including but not limited to those expenses related to the
governance of FGIC and supervision by AGC, such as non-AGC director fees, directors and
officers insurance for non-AGC employees, audit expenses and associated legal fees, regulatory
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filing fees and litigation costs and expenses. The initial term of the management agreement will
be five years, with automatic renewal thereafter unless terminated by a party. FGIC may
terminate the management agreement without cause only upon paying a termination fee equal to
one year’s management fees.
10. FGIC Board Matters. The FGIC board of directors will comprise seven directors, the minimum
number of directors required under New York insurance law. Of the seven, two will be
designated by the commuting FGIC Interest Holders; two will be designated by AGC; and three
will be designated by mutual agreement of the FGIC Interest Holders and AGC. A vacancy in one
of the two positions designated by the FGIC Interest Holders will be filled at the direction of the
remaining FGIC Interest Holders’ director. A vacancy in one of the two positions designated by
AGC will be filled at the direction of AGC. A vacancy in one of the three other positions will be
filled at the direction of a majority of the remaining directors, and in the event of a tie, a director
designated by AGC shall serve as the tiebreaking vote.
11. Breakage. “Breakage” means all costs incurred in connection with terminating FGIC contracts,
licenses and other arrangements not needed for the future administration of FGIC, including
severance, other than the four most expensive severance packages (“Top 4 Severance Costs”). In
satisfaction of these costs, (i) an amount equal to 50% of Breakage will be deducted from the Net
Reinsurance Consideration, and (ii) an amount equal to 50% of Breakage plus an amount equal to
Top 4 Severance Costs will be deducted from Distributable Cash being paid out to commuting
FGIC Interest Holders on the Effective Date.
12. Transaction Costs. FGIC shall bear all costs incurred by FGIC or the participating FGIC
Interest Holders in connection with the transaction, including but not limited to fees due to
advisors to such parties and regulatory filings made by such parties (“Transaction Expenses”).
13. Permitted Practices. The approval of the following permitted accounting practices for FGIC
from the Superintendent shall be a condition to closing the Transaction: (i) permission to
recognize the ceding commission as income immediately and (ii) permission to release
contingency reserves.
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EXHIBIT A
SIGNATORY FIRMS
1. Monarch Alternative Capital LP, on behalf of certain of its advisory clients
2. Aurelius Capital Management, LP, solely as manager on behalf of its managed entities and not in its
individual capacity
3. King Street Capital Management, L.P., on behalf of certain entities it manages
4. Canyon Capital Advisors LLC (on behalf of its participating funds and/or clients)
5. Panning Capital Management, LP, on behalf of certain entities it manages
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EXHIBIT B
PRO FORMA BALANCE SHEET
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EXHIBIT C
PUERTO RICO RESERVES
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EXHIBIT D
RMBS RESERVES
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EXHIBIT E
SECURITIES ELIGIBLE FOR COVERAGE IN THE XOL AGREEMENT
EXHIBIT B DRAFT - SUBJECT TO MATERIAL CHANGE
Illustrative Commutation Transaction PRIVILEGED AND CONFIDENTIAL
Set forth below is an illustrative commutation transaction that assumes a 90% commutation of FGIC's distressed RMBS
and Puerto Rico insured exposure, 100% commutation of Detroit DPOs and 90% commutation of all other DPOs.
FGIC's non-distressed insured exposure is assumed to be reinsured.
Assumes no modifications to existing DPOs and insured policies not tendered in the commutation transaction
As of 06/30/2016
Pre - Pre -
Transaction Transaction Reinsurance Comm. Post-Comm
FGIC Adjustment Adj. FGIC Transaction Trans. FGIC
Assets
Total Admitted Assets $2,419,327 $2,419,327 $2,419,327
Unrealized Gain on Bond Portfolio 174,356 174,356 174,356
Unrealized Gain on Common Stock and Other Assets 88,265 88,265 88,265
ResCap Units TBD - -
Other TBD
Total Adjusted Admitted Assets $2,419,327 $262,621 $2,681,948 $2,681,948
Reinsurance and Excess of Loss Fees (225,000) ($225,000)
Non-Commuting DPOs (87,267) (87,267)
Transaction Costs (25,000) (25,000)
Cash Available for Commutation (1,946,617) (1,946,617)
Total Assets $2,419,327 $262,621 $2,681,948 ($225,000) ($2,058,884) $398,064
Liabilities & Capital Surplus
Claim Reserve (1)
Distressed RMBS (2) 903,461 594,476 1,497,937 (1,348,143) 149,794
Distressed Puerto Rico 482,721 686,399 1,169,120 (1,052,208) 116,912
Total $1,386,182 $1,280,875 $2,667,057 - ($2,400,351) $266,706
Detroit DPO (3) 937,103 937,103 (937,103) -
RMBS DPO (3) 817,880 817,880 (817,880) -
Other DPO (3) 54,790 54,790 (54,790) -
Total DPO 1,809,773 1,809,773 (1,809,773) -
Policy Revision Adjustment (4) (1,276,717) 1,276,717 - -
Loss Adjustment Expense 16,143 (13,143) 3,000 3,000
Unearned Premiums 55,482 (55,482) - -
Contingency Reserve 328,109 (328,109) - -
Other Liabilities 17,524 17,524 17,524
Provision for Reinsurance 5,597 (5,597) - -
Payable for Securities Purchased 10,758 10,758 10,758
Income Tax Payable 76 76 76
Total Other Liabilities 433,689 (402,331) 31,358 31,358
Total Liabilities $2,352,927 $2,155,261 $4,508,188 - ($4,210,124) $298,064
Statutory Surplus/(Deficiency)
Capital & Surplus $66,400 - ($1,826,240) - $100,000
Total Liabilities and Capital Surplus $2,419,327 $2,681,948 $398,064
NPIF
Non-Distressed Intl and Public Finance 5,406,246 $5,406,246 (5,406,246) -
Non-Distressed RMBS and Other Structured Finance 815,743 815,743 (815,743) -
Distressed RMBS 3,305,272 3,305,272 - (2,974,745) 330,527
Distressed Puerto Rico 1,169,367 1,169,367 - (1,052,431) 116,937
Total $10,696,629 $10,696,629 ($6,221,989) ($4,027,176) $447,464
(1) Claims reserve increased by $1.3bn to reflect AGO's estimated required capital; final number subject to additional due diligence
(2) Distressed RMBS not adjusted for FGIC owned bonds (subject to further due diligence)
(3) DPO includes DPO accretion as of 06/30/2016
(4) Policy revision is an accounting adjustment to get to a capital surplus to $66.4mm
EXHIBIT C DRAFT - SUBJECT TO MATERIAL CHANGE
Summary of AGO Required Capital - Puerto Rico PRIVILEGED AND CONFIDENTIAL
Set forth below is AGO's required capital on FGIC's distressed Puerto Rico Obligations
AGO
NPIF Estimate Required Capital
Puerto Rico Policies (06/30/2016) Required Capital / NPIF (%)
GO & PBA
Puerto Rico Commonwealth, PR Pub Imp GO Ref 2006B $32,815,000 $6,315,362 19.25%
Puerto Rico Commonwealth, PR Pub Imp GO Ref 2007 A-1 & A-5 73,035,000 15,951,963 21.84%
Puerto Rico Public Building Authority Series H 7,850,000 1,597,317 20.35%
Puerto Rico, Commonwealth GO Pub Imp 2002 A 6,000,000 1,374,007 22.90%
Puerto Rico, Commonwealth GO Pub Imp RFDG 2002 A 2,000,000 418,590 20.93%
Puerto Rico, Commonwealth GO Pub Imp 2003 A 25,000,000 5,855,462 23.42%
Puerto Rico, Commonwealth GO 2002 Pub Imp 2002 A 112,149,320 23,819,410 21.24%
Puerto Rico, Commonwealth GO RFD 2002 Pub Imp 2003 A 27,770,000 5,692,894 20.50%
Subtotal $286,619,320 $61,025,005 21.29%
Highway, Infrastructure, Other
Puerto Rico Conv Ctr Dist Auth, PR Hotel Rev 06A $97,075,000 $69,325,789 71.41%
Puerto Rico Infras Fin Auth, PR, Spec Tax Rev 05AB 348,739,514 580,488,841 166.45%
Puerto Rico Highway & Trans, PR Rev Ser K,L and BB 30,270,000 31,406,628 103.75%
Puerto Rico Highway & Trans, PR Rev Ser M, N, CC, 215,643,557 249,441,222 115.67%
Puerto Rico Highway & Trans, PR Sen Lien 04 89,590,000 92,314,383 103.04%
Puerto Rico Highway & Transportation 2003 24,315,000 19,961,241 82.09%
Puerto Rico Highway & Transportation Sub Lien 2003 77,115,000 65,156,931 84.49%
Subtotal $882,748,071 $1,108,095,034 125.53%
Total $1,169,367,391 $1,169,120,039 99.98%
EXHIBIT D DRAFT - SUBJECT TO MATERIAL CHANGE
Summary of AGO Required Capital - RMBS PRIVILEGED AND CONFIDENTIAL
Set forth below is AGO's required capital on FGIC's RMBS Obligations
NPIF AGO Estimate % of
RMBS Policies (06/30/2016) Req. Capital (1) NPIF
Ultimate Pay
MSAC 2007-NC4 $463,912,431 $214,016,241 46.1%
TMTS 2006-8SL 321,369,320 156,372,373 48.7%
TMTS 2005-13SL 139,014,300 153,339,981 110.3%
TMTS 2006-2HGS 138,773,743 62,674,543 45.2%
BARN 2007-1 N1 126,006,408 99,668,301 79.1%
MABS 2005-AB1 61,861,829 36,664,772 59.3%
MABS 2006-AB1 59,127,000 22,122,025 37.4%
CMLTI 2005-WF2 AF6B 52,540,000 14,838,017 28.2%
BSABS 2006-AC1 1A2 23,199,932 18,192,705 78.4%
CMLTI 2006-WF1W 17,099,556 12,379,362 72.4%
CMLTI 2006-WF1W 10,259,734 - -
Total Ultimate Pay $1,413,164,252 $790,268,322 55.9%
Current Pay
CWHEL 2006-H $261,225,868 $116,602,114 44.6%
CWHEL 2007-C A 138,947,346 41,568,111 29.9%
CWL 2006-S3 118,663,663 62,026,820 52.3%
CWL 2006-S5 118,135,628 62,632,176 53.0%
CWL 2006-S2 114,056,769 54,569,924 47.8%
BSABS 2007-SD3 A 103,447,592 10,174,306 9.8%
CWHEL 2005-B 83,052,004 29,972,752 36.1%
IMM 2004-11 54,847,281 2,650,478 4.8%
QUEST 2006-X1 52,493,724 11,012,169 21.0%
INDS 2006-2B A 39,081,720 12,212,652 31.2%
QUEST 2005-X2 A2 26,570,222 5,369,438 20.2%
HEMT 2006-2 2A1 18,664,131 11,403,888 61.1%
INDS 2006-1 18,101,010 58,309,087 322.1%
AHM 2005-2 6A 8,125,625 8,412,742 103.5%
AHM 2005-4 2A 7,938,105 3,698,162 46.6%
AHM 2005-1 9A 4,050,894 4,178,310 103.1%
BSABS 2005-AC9 A5 19,494,899 7,468,941 38.3%
INABS 2006-H1 A 30,962,532 9,226,368 29.8%
Total Current Pay $1,217,859,010 $511,488,437 42.0%
Other RMBS with AGO Required Capital 674,248,854 196,180,341 29.1%
Total Distressed RMBS Insured Exposure $3,305,272,117 $1,497,937,100 45.3%
Other RMBS (2) 557,888,593 - -
Other Structured Finance (3) 257,854,826 - -
Total Structured Finance $4,121,015,535 $1,497,937,100 36.3%
(1) Collateral and loss assumptions subject to further discussions between AGO and FGIC Interest Holders. Discount rate is the risk free swap + 100bps
(2) RMBS with no AGO required capital; assumed to be included in the reinsurance transaction
(3) Other structured finance with no AGO required capital; assumed to be included in the reinsurance transaction
EXHIBIT E DRAFT - SUBJECT TO MATERIAL CHANGE
XOL Agreement PRIVILEGED AND CONFIDENTIAL
Set forth below is a list of the Puerto Rico and RMBS Obligations to be covered under the XOL Agreement.
All other policies to be included in the reinsurance transaction
AGO
NPIF Estimate Required Capital
(06/30/2016) Required Capital / NPIF (%)
Puerto Rico Obligations
GO & PBA
Puerto Rico Commonwealth, PR Pub Imp GO Ref 2006B $32,815,000 $6,315,362 19.25%
Puerto Rico Commonwealth, PR Pub Imp GO Ref 2007 A-1 & A-5 73,035,000 15,951,963 21.84%
Puerto Rico Public Building Authority Series H 7,850,000 1,597,317 20.35%
Puerto Rico, Commonwealth GO Pub Imp 2002 A 6,000,000 1,374,007 22.90%
Puerto Rico, Commonwealth GO Pub Imp RFDG 2002 A 2,000,000 418,590 20.93%
Puerto Rico, Commonwealth GO Pub Imp 2003 A 25,000,000 5,855,462 23.42%
Puerto Rico, Commonwealth GO 2002 Pub Imp 2002 A 112,149,320 23,819,410 21.24%
Puerto Rico, Commonwealth GO RFD 2002 Pub Imp 2003 A 27,770,000 5,692,894 20.50%
Subtotal $286,619,320 $61,025,005 21.29%
Highway, Infrastructure, Other
Puerto Rico Conv Ctr Dist Auth, PR Hotel Rev 06A $97,075,000 $69,325,789 71.41%
Puerto Rico Infras Fin Auth, PR, Spec Tax Rev 05AB 348,739,514 580,488,841 166.45%
Puerto Rico Highway & Trans, PR Rev Ser K,L and BB 30,270,000 31,406,628 103.75%
Puerto Rico Highway & Trans, PR Rev Ser M, N, CC, 215,643,557 249,441,222 115.67%
Puerto Rico Highway & Trans, PR Sen Lien 04 89,590,000 92,314,383 103.04%
Puerto Rico Highway & Transportation 2003 24,315,000 19,961,241 82.09%
Puerto Rico Highway & Transportation Sub Lien 2003 77,115,000 65,156,931 84.49%
Subtotal $882,748,071 $1,108,095,034 125.53%
Total Puerto Rico $1,169,367,391 $1,169,120,039 99.98%
RMBS Obligations
Ultimate Pay
MSAC 2007-NC4 $463,912,431 $214,016,241 46.1%
TMTS 2006-8SL 321,369,320 156,372,373 48.7%
TMTS 2005-13SL 139,014,300 153,339,981 110.3%
TMTS 2006-2HGS 138,773,743 62,674,543 45.2%
BARN 2007-1 N1 126,006,408 99,668,301 79.1%
MABS 2005-AB1 61,861,829 36,664,772 59.3%
MABS 2006-AB1 59,127,000 22,122,025 37.4%
CMLTI 2005-WF2 AF6B 52,540,000 14,838,017 28.2%
BSABS 2006-AC1 1A2 23,199,932 18,192,705 78.4%
CMLTI 2006-WF1W 17,099,556 12,379,362 72.4%
CMLTI 2006-WF1W 10,259,734 - -
Total Ultimate Pay $1,413,164,252 $790,268,322 55.9%
EXHIBIT E DRAFT - SUBJECT TO MATERIAL CHANGE
XOL Agreement PRIVILEGED AND CONFIDENTIAL
Set forth below is a list of the Puerto Rico and RMBS Obligations to be covered under the XOL Agreement.
All other policies to be included in the reinsurance transaction
AGO
NPIF Estimate Required Capital
(06/30/2016) Required Capital / NPIF (%)
RMBS Obligations
Current Pay
CWHEL 2006-H $261,225,868 $116,602,114 44.6%
CWHEL 2007-C A 138,947,346 41,568,111 29.9%
CWL 2006-S3 118,663,663 62,026,820 52.3%
CWL 2006-S5 118,135,628 62,632,176 53.0%
CWL 2006-S2 114,056,769 54,569,924 47.8%
BSABS 2007-SD3 A 103,447,592 10,174,306 9.8%
CWHEL 2005-B 83,052,004 29,972,752 36.1%
IMM 2004-11 54,847,281 2,650,478 4.8%
QUEST 2006-X1 52,493,724 11,012,169 21.0%
INDS 2006-2B A 39,081,720 12,212,652 31.2%
QUEST 2005-X2 A2 26,570,222 5,369,438 20.2%
HEMT 2006-2 2A1 18,664,131 11,403,888 61.1%
INDS 2006-1 18,101,010 58,309,087 322.1%
AHM 2005-2 6A 8,125,625 8,412,742 103.5%
AHM 2005-4 2A 7,938,105 3,698,162 46.6%
AHM 2005-1 9A 4,050,894 4,178,310 103.1%
BSABS 2005-AC9 A5 19,494,899 7,468,941 38.3%
INABS 2006-H1 A 30,962,532 9,226,368 29.8%
Total Current Pay $1,217,859,010 $511,488,437 42.0%
Other RMBS
Alliance 1998-2 $3,219,105 $22,304 0.7%
Alliance 1999-2 15,826,368 1,038,623 6.6%
Alliance 1999-3 12,549,527 2,626,819 20.9%
Alliance 1999-4 17,257,023 1,359,156 7.9%
Alliance 2000-1 6,376,501 444,294 7.0%
BSABS 2005-AC5, Class 1-A3 15,796,667 4,004,592 25.4%
BSABS 2005-AC6, Class IA3 and IA4 25,805,772 2,665,405 10.3%
ContiMortgage 1995-1 900,601 655,987 72.8%
ContiMortgage 1995-2 822,216 482,633 58.7%
ContiMortgage 1995-4 1,925,468 478,817 24.9%
ContiMortgage 1996-1 2,440,439 3,037,065 124.4%
CWABS 2004-B (1st lien) 41,413,569 20,775,797 50.2%
CWABS 2004-C 21,283,946 5,772,307 27.1%
CWABS 2004-E 20,042,968 2,305,021 11.5%
CWABS 2004-F 28,755,264 5,309,948 18.5%
CWABS 2004-U 29,066,405 9,792,008 33.7%
CWHEQ 2005-G 99,192,604 32,952,957 33.2%
CWHEQ 2005-H 98,637,573 34,976,952 35.5%
DLJ 1993-4 166,899 20,184 12.1%
DMSI 2004-5, Class A-4A, A-5A, A-5B 12,499,001 661 0.0%
Impac CMB Trust 2004-10 117,330,318 4,282,256 3.6%
IndyMac 2005-L1 - 1,505,142 -
IndyMac 2005-L2 - 2,573,079 -
IndyMac 2005-L3 - 4,386,959 -
IndyMac 2006-L2 - 20,548,946 -
Irwin 2006-2 Class IA & VFN 9,436,047 22,999,242 243.7%
New Century HEL Trust 2004-A (FRMS) 84,244,493 687,537 0.8%
Sovereign 2000-1 HEL Trust 7,665,953 8,452,337 110.3%
Terwin Mortgage Trust 2004-23 1,594,128 2,023,312 126.9%
Total Other RMBS $674,248,854 $196,180,341 29.1%
Total RMBS $3,305,272,117 $1,497,937,100 45.3%
Total XOL Obligations $4,474,639,507 $2,667,057,140 59.6%