CIFG Holding, the holding company for CIFGs financial guaranty subsidiaries, said that it, along with its principal shareholders, Banque Populaire Group and Caisse dEpargne Group, has reached a final settlement with credit default swap (CDS) counterparties and bondholders holding 98% of its gross par outstanding of ABS CDO exposures and certain specified CRE CDO exposures.
The agreement commutes around $12 billion in notional ABS CDO and CRE CDO exposures in exchange for a cash payment and equity.
Because of the equity consideration, the principal shareholders are no longer in control of CIFG.
This deal considerably limits CIFGs exposure to troubled derivatives, resulting in a notably improved capital position as well as claims paying resources.
The firm also announced that it has finalized a previously announced agreement with Assured Guaranty Corp. where Assured assumed though reinsurance roughly $13 billion of CIFGs U.S. public finance portfolio.
I am very pleased to announce the derivative counterparty settlement, as well as our final agreement with Assured, as they both significantly enhance CIFGs financial rating and enable the release of significant amounts of capital on account of the commutation. This transaction also increases the companys claims paying resources, better enabling the company to honor its remaining obligations to policyholders, said John Pizzarelli, chief executive officer of CIFG. I want to thank our board of directors, our shareholders, our counterparties, my colleagues and New York State Insurance Superintendent Eric Dinallo for all of their efforts in achieving this milestone settlement.
The agreements came after a Memorandum of Understanding CIFG reached with counterparties holding 75% of the affected ABS CDO and CRE CDO portfolio in September. The final settlements were reached with the cooperation of the insurance regulators in New York, Bermuda and France.
Lazard and Torsiello Capital Advisors were the financial advisors on this deal while Cadwalader, Wickersham & Taft acted as CIFGs legal counsel.Paul, Weiss, Rifkind, Wharton & Garrison represented CIFGs principal shareholders. Sullivan & Cromwell and FTI Consulting represented the counterparties participating in this agreement.