A recent corporate reorganization involving Assured Guaranty Municipal Corp. (“AGM”) may have created a disclosure obligation for municipal issuers with bonds and other obligations secured by an AGM insurance policy.
On August 1, 2024, AGM merged into an affiliate, Assured Guaranty Inc. (“AG”). According to information about the merger provided by AG, which is available at https://assuredguaranty.com/investor-information/by-company/ag/agm-ag-merger, AGM insurance policies automatically became AG policies by operation of law pursuant to the merger. Accordingly, municipal issuers do not need to take any action to maintain bond insurance on affected securities. The merger has not impacted ratings of securities insured by AGM.
Industry participants have suggested the merger between AGM and AG may have triggered a requirement for issuers with securities insured by AGM to disclose the “substitution of credit or liquidity providers” within 10 business days after the occurrence of the event, as required by SEC Rule 15c2-12 (“Rule 15c2-12) and the terms of continuing disclosure undertakings entered into pursuant to Rule 15c2-12. As described by the materials provided in the link above, AG became obligated on affected policies by operation of law through the merger in accordance with the terms of the policies. We suspect the substitutions of credit or liquidity providers intended to trigger an event notice requirement in Rule 15c2-12 were those that the issuer actively initiated or otherwise consented to and would not include a change resulting from action of the insurer that resulted in a successor becoming obligated on the policies in accordance with the terms of the insurance policies.
Nevertheless, absent regulatory guidance or an industry-wide consensus, we suggest municipal issuers with outstanding securities originally insured by AGM file a notice describing the merger and resulting change of insurer on or before August 15, 2024. The potential downside to failing to file the notice by the deadline is minimal. An issuer that does not timely file this notice may be required to make the filing at a later date and disclose the failure in a future official statement.
Gilmore & Bell clients with outstanding AGM insured obligations should contact their Gilmore & Bell attorney to discuss filing a notice.
