Business Context and Reporting Period
Company: Assured Guaranty Ltd.
Filing Type: Form 8-K (Current Report)
Date: May 6, 2013
Event: Resolution of legal claims and settlement agreement regarding residential mortgage-backed securities (RMBS) transactions with UBS Real Estate Securities Inc. and affiliates.
Key Financial Metrics
- Immediate Cash Recovery: Approximately $358.5 million initial cash payment to Assured Guaranty Municipal Corp. (AGM).
- Future Loss Mitigation: UBS agreed to reimburse 85% of all future losses on specified RMBS transactions via a collateralized loss-sharing reinsurance arrangement.
- Timing: Initial payment expected within one business day of signing; reinsurance arrangement expected by Q3 2013.
- Scope: Covers past losses on MASTR Adjustable Rate Mortgages Trust 2006-OA2, 2007-1, and 2007-3 first lien transactions.
Material Changes and Legal Resolution
This filing resolves a lawsuit filed by AGM against UBS in New York Federal court alleging breaches of representations and warranties. The agreement settles:
- All RMBS claims asserted against UBS regarding the specified MASTR transactions.
- The lawsuit against UBS Securities LLC regarding the IndyMac IMSC Mortgage Loan Trust, Series 2007-HOA-1a first lien transaction.
- Potential claims on three other RMBS transactions.
Outlook, Risks, and Management Commentary
Management views this agreement as a resolution of significant litigation. However, the filing includes a cautionary statement regarding forward-looking statements. Key risks include:
- Failure of UBS to make payments or establish reinsurance arrangements as agreed.
- Other unidentified risks and uncertainties that could cause actual results to differ materially from current expectations.
Investor Verification Checklist
- Confirm receipt of the $358.5 million initial cash payment within the expected timeframe.
- Verify the establishment of the collateralized loss-sharing reinsurance arrangement by Q3 2013.
- Monitor future loss reports on the specified MASTR and IndyMac transactions to ensure the 85% reimbursement is applied correctly.
- Review the full text of the settlement agreement (Exhibit 99.1) for specific terms regarding the three other resolved RMBS transactions.