FGIC Terminates Transaction Support Agreement, Reaffirms Commitment to Responsible Run-Off Strategy
Financial Guaranty Insurance Company (FGIC), a New York-based insurer known for its legacy portfolio of municipal and structured finance guarantees, has announced the formal termination of the Transaction Support Agreement (TSA) it entered into earlier this year. The agreement, originally dated February 29, 2024, was established between FGIC and a group of stakeholders, including certain holders of FGIC-insured securities and units issued by Custodial Trusts tied to Puerto Rico-related debt instruments. According to FGIC’s official statement, the TSA termination will take effect on May 30, 2025.
Background on the Transaction Support Agreement (TSA)
The TSA was designed to facilitate a potential transaction aimed at accelerating the run-off of FGIC’s remaining insured obligations. The agreement laid the groundwork for discussions and negotiations around a financial restructuring that would have allowed FGIC to reduce its outstanding insurance exposure more quickly than through its traditional run-off process. In particular, the TSA focused on securities linked to Puerto Rico, which have been the subject of complex financial litigation and restructuring efforts over the past decade.
FGIC entered into the TSA with the intent of resolving certain liabilities through negotiated settlements with key holders of its insured debt. The deal, if executed, would have marked a major step in winding down FGIC’s exposure and bringing more certainty to stakeholders involved in long-term obligations covered under FGIC’s insurance policies.
However, despite several months of discussions, the parties were ultimately unable to reach an agreement that would satisfy all stakeholders under terms that aligned with FGIC’s strategic and financial objectives. As a result, FGIC made the decision to terminate the TSA in accordance with its provisions.
FGIC’s Current Position and Strategic Focus
Although the termination of the TSA represents a shift away from a previously considered acceleration strategy, FGIC has made it clear that it remains committed to responsibly managing the long-term run-off of its remaining insurance portfolio. This includes continuing efforts to reduce policy obligations through consensual settlements and negotiated transactions, particularly those that align with the company’s overarching goal of maintaining and protecting remaining assets for the benefit of policyholders, creditors, and other stakeholders.
“The termination of the TSA does not signify the end of FGIC’s willingness to engage with stakeholders regarding its portfolio,” the company noted in its statement. “Rather, it reflects the need for flexibility as we continue to evaluate alternative approaches that can provide long-term value and stability.”
FGIC’s decision is rooted in its mandate under the First Amended Plan of Rehabilitation, approved on June 4, 2013, which outlines the roadmap for the company’s resolution and run-off process. The plan was created in response to FGIC’s financial distress during the global financial crisis, when the company faced mounting liabilities associated with its guarantees on structured finance products and municipal debt. Since then, FGIC has operated under a state-supervised rehabilitation process and has focused exclusively on winding down its obligations.
FGIC’s Rehabilitation and Run-Off Strategy
Following the 2008 financial crisis, FGIC was one of several monoline insurers severely impacted by the collapse of the structured finance market. The insurer had written guarantees on a large number of mortgage-backed securities, collateralized debt obligations (CDOs), and other complex financial instruments. When the underlying assets in those securities began to deteriorate, FGIC was required to honor claims under its guarantees—leading to significant financial strain.
As losses mounted, the New York State Department of Financial Services (DFS) stepped in, placing the company into rehabilitation in 2011. Under the supervision of the DFS and with court approval, FGIC implemented the First Amended Plan of Rehabilitation in 2013. The plan provided for the continued administration of claims, the equitable treatment of policyholders, and the orderly reduction of liabilities over time.
Since entering rehabilitation, FGIC has ceased writing new insurance policies and now operates solely to manage the run-off of its insured portfolio. The company’s goal has been to resolve outstanding obligations through negotiated settlements when possible, litigate where necessary, and preserve capital for long-term commitments.
The Puerto Rico-related securities addressed in the TSA represent a particularly complex aspect of FGIC’s portfolio. Puerto Rico’s debt crisis has involved multiple stakeholders, court rulings, and legal frameworks—including Title III proceedings under PROMESA (the Puerto Rico Oversight, Management, and Economic Stability Act). FGIC has actively participated in negotiations and litigation related to Puerto Rico’s debt restructuring and remains engaged in discussions aimed at achieving consensual resolutions for its insured exposures tied to the island’s debt.
Stakeholder Implications
While the TSA termination may signal a pause in one avenue of resolution, stakeholders—including policyholders, institutional investors, and creditors—should not interpret the move as a retreat from FGIC’s long-term goals. The company remains financially focused on meeting its obligations and will continue to seek out and evaluate opportunities that provide responsible and fair outcomes for all parties involved.
Holders of FGIC-insured securities, particularly those tied to Puerto Rico, will be keenly watching for any subsequent announcements about alternative transactions or settlements. The company has emphasized its willingness to pursue mutually beneficial resolutions when feasible and continues to welcome constructive dialogue with counterparties.
FGIC’s management has also reiterated that any future transaction—whether it involves asset sales, claim settlements, or broader restructuring—will need to comply with the legal framework set forth in the rehabilitation plan and gain approval from regulatory authorities as necessary.
A Cautious but Open Approach
Despite the challenges inherent in resolving legacy financial obligations from the pre-crisis era, FGIC continues to make progress in its rehabilitation. The termination of the TSA may temporarily shift the timeline for accelerating portfolio resolution, but the company remains committed to pursuing strategic transactions that align with its core mandate.
The rehabilitation plan, while conservative in nature, provides FGIC with the tools to engage stakeholders, structure settlements, and manage risk in a way that preserves value over time. The company’s ability to terminate the TSA without disrupting ongoing operations demonstrates a level of flexibility and strategic control that is key to navigating its complex obligations.
In the months ahead, industry observers, creditors, and policyholders alike will be monitoring developments as FGIC evaluates new opportunities for portfolio resolution. Meanwhile, the insurer’s disciplined approach to managing its run-off portfolio underscores its commitment to long-term responsibility, transparency, and stakeholder value.
For parties interested in further information or potential future engagement, FGIC advises reaching out through its investor communications channels or regulatory filings, where updates will be made available as warranted.
About FGIC
FGIC is a New York stock insurance corporation and a wholly owned subsidiary of FGIC Corporation. FGIC emerged from rehabilitation on August 19, 2013, and is responsible for administering its outstanding insurance policies in accordance with the terms of the Rehabilitation Plan. Please visit www.fgic.com.
Additional Information:
Weil, Gotshal & Manges LLP is serving as counsel and Houlihan Lokey Capital, Inc. is serving as financial advisor.
FORWARD-LOOKING STATEMENTS
This notice contains “forward-looking statements” – that is, statements related to possible future events. Forward-looking statements often address expectations and beliefs as to future performance, results and business plans. You should not place undue reliance on forward-looking statements because they speak only as of the date they are made and are necessarily subject to risks and uncertainties that could cause actual results and performance to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements are based upon FGIC management’s current expectations and beliefs concerning future events. FGIC undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
