Assured Guaranty, a Bermuda-based provider of credit enhancement products to the public finance, structured finance and mortgage markets, has inked a $358m residential mortgage-backed securities (RMBS) settlement with Switzerland-based UBS.
The settlement resolves Assured Guaranty’s claims related to RMBS transactions that were issued, underwritten or sponsored by UBS and insured by Assured Guaranty under financial guaranty insurance policies.
As per terms of the loss sharing agreement, the claimant will receive an initial cash payment of $358m, while acquitting all charges against the Swiss lender leveled by it.
UBS has also agreed to reimburse Assured Guaranty for a part of all future losses on certain transactions under a collateralized loss-sharing reinsurance agreement to be initiated by the third quarter of 2013.
Assured Guaranty president and CEO Dominic Frederico said that the settlement will boost its balance sheet by offering a substantial cash payment and certainty related to the loss-sharing arrangement on future claims.
"We have now reached favorable settlements or been awarded compensation in court with respect to approximately 55% of the par outstanding of Assured Guaranty’s troubled legacy RMBS," Frederico added.
In February 2012, Assured filed a lawsuit against Zurich-based UBS, following its refusal to buy back hundreds of millions of dollars of mortgages.
The company accused the bank for breaching contract, which was focused on financial guaranty insurance of underlying $1.5bn, offered in 2006 and 2007 to three mortgage-backed securities transactions by Assured.
Assured has filed similar cases against units of JPMorgan Chase & Co, Credit Suisse and Flagstar Bancorp, while it had settled the case with Bank of America for $1.1bn and Deutsche Bank for $165.6m, as reported by Reuters.