Bond Insurers Getting Killed By Puerto Rico Uncertainty

Shares of Assured Guaranty Ltd. AGO and MBIA Inc. MBI were trading lower by more than 12 percent Monday after Puerto Rico's Governor Garcia Padilla described the nation's $72 billion of debt as being "unpayable."

Assured Guaranty and MBIA jointly guarantee $9.4 billion worth of Puerto Rico debt and face large losses after the governor reversed a previous stance that the government would do whatever it takes to avoid a default.

MBIA's National Public Finance unit is prepared to continue working with the appropriate parties "toward a solution that addresses Puerto Rico's significant fiscal and operational difficulties while respecting the rights of creditors," according to Bloomberg which cited a company spokesperson. At the same time, a spokesperson for Assured Guaranty said he didn't have an immediate comment.

See Also: Puerto Rico Could Be On Cusp Of Default

The New York Times noted that the government "would probably" seek "significant" concessions from as many creditors as possible. Some of the options available include deferring payments for as long as five years or extending the timetable for repayment.

"The debt is not payable," Padilla told the publication. "There is no other option. I would love to have an easier option. This is not politics, this is math."

Bloomberg also noted that Padilla said that this government could not continue borrowing money to address budget deficits while asking its 3.6 million residents to accept tax increases and pension cuts. In fact, the government official said that creditors must join in and "share the sacrifices."

"If they don't come to the table, it will be bad for them," Garcia also said. "What will happen is that our economy will get into a worse situation and we'll have less money to pay them. They will be shooting themselves in the foot."