Citigroup, Scotiabank Don't Want to be Drivers of PREPA's Restructuring; BTIG Comments on Reuters Headlines (AGO) (MBI)

BTIG analyst Mark Palmer commented on Assured Guaranty (NYSE: AGO) and MBIA, Inc. (NYSE: MBI) in a research note Wednesday. Both stocks moved higher after Reuters reported that PREPA is likely to receive an extension of its $671 million in lines of credit from Scotiabank and Citigroup The credit line is set to expire tomorrow and may be extended to March 2015.

"A flashpoint in the ongoing saga over whether the Puerto Rico Electric Power Authority (PREPA) will move to restructure its more than $9bn in debt – a drama that began when Governor Alejandro Garcia Padilla on June 28 reversed his prior stance and signed the Puerto Rico Public Corporation Debt Enforcement and Recovery Act allowing PREPA and several other entities to enter into debt modifications – will occur on Thursday when $671mm in lines of credit used to purchase oil to fuel the authority’s power plants are set to expire," said Palmer. "As such, the attention of investors in buy-rated Assured Guaranty (AGO) and neutral-rated MBIA (MBI) – which had $772mm and $1.53bn, respectively, of net insured exposure to PREPA as of June 30 – will be trained on the situation as a potential announcement approaches."

"Most investors with whom we have discussed the situation believe that Citigroup and Scotiabank would strongly prefer to avoid being the drivers of the beginning of a restructuring of PREPA’s debt," he added.

For an analyst ratings summary and ratings history on Assured Guaranty click here. For more ratings news on Assured Guaranty click here.

Shares of Assured Guaranty closed at $22.49 yesterday.

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