BTIG Update on AGO, MBI, and AMBC Regarding Puerto Rico

Dear Investors,

In the aftermath of Hurricane Maria devastating Puerto Rico, there has a been a great deal of talk regarding its impact on bond prices and the restructuring process.  Much of the analysis is slanted and is quite poorly informed to be honest.  Remember that these companies are not Property & Casualty insurers that have to pay to repair homes or businesses.  Most of the insured bonds are either revenue bonds or general obligation bonds.  Revenue bonds tend to hold up quite well in bankruptcy because they are backed by pledged revenue streams, such as from the toll roads, utilities, etc.  The GO bonds have the highest constitutional protections and payments are supposed to become before even government salaries.  Obviously, there will be write-downs on the bonds, which we have known for years.

This is very similar to what we saw happen in Detroit when it declared bankruptcy after undergoing a massive economic decline and population exodus.  There was a lot of talk that GO bonds would only recover 15-20 cents and ultimate recoveries were 74 cents on the dollar for the bond insurance companies.  It is essential to get into the actual court proceedings where liens can be enforced to ensure fair negotiations.  Ultimately, it is in everybody’s personal and financial interests to see a vibrant and recovering Puerto Rico.

I believe that this is a great window of opportunity to dramatically improve the economic trajectory of the island as it rebuilds what has been a dilapidated and inefficient infrastructure.  Detroit has seen quite a renaissance and Puerto Rico will likely see the same thing.  If you are interested in learning more, I’d highly recommend the analyst report I linked to below.  If the stocks were to hit his price targets, we will made extraordinary returns moving forward.  I’m actually more bullish than he is on AGO and AMBC, while being about the same as he is on MBI.  Thank you very much and let me know if you need anything!

More Noise Ahead of Judicial Process in Puerto Rico Has Created Buying Opportunity in AGO, MBI, AMBC




Tim Travis