August 8th, 2008
ACA Capital Holdings Announces Global Settlement by its Insurance Subsidiary with
its Counterparties and the Restructuring of Medium Term Notes
ACA Capital Holdings to change its name to Manifold Capital Corp.
NEW YORK, Aug 08, 2008 (BUSINESS WIRE) -- ACA Capital Holdings, Inc. today announced
that ACA Financial Guaranty Corporation, ACA Capital's financial guaranty insurance
subsidiary, has entered into a global settlement agreement with its Structured Credit
and other similarly situated counterparties. The Agreement provides for a comprehensive
plan to satisfy and discharge all claims associated with ACA Financial Guaranty's
exposure to Credit Default Swaps, including the swaps on all of its exposure to
ABS and corporate Collateralized Debt Obligations (CDOs). Under the agreement, the
counterparties have terminated all of their respective transactions with ACA Financial
Guaranty and received a cash payment and surplus notes issued by ACA Financial Guaranty.
The holders of the surplus notes will generally share pro-rata any future dividends
or distributions from ACA Financial Guaranty up to $1 billion in the aggregate.
95% of the surplus notes were issued to the counterparties, with the remaining 5%
being issued to ACA Capital. The surplus notes issued to the counterparties will
provide, among other rights relating to ACA Financial Guaranty, voting rights to
nominate all of the persons to serve as directors of ACA Financial Guaranty. Additionally,
ACA Capital has agreed that it will no longer be responsible for the management
of ACA Financial Guaranty.
ACA Capital and ACA Financial Guaranty have also entered into a restructuring agreement
that provides for a comprehensive settlement and release of all claims associated
with $100 million of medium term notes insured by ACA Financial Guaranty. Under
this agreement, the note holders will receive an aggregate cash payment of approximately
$47 million and title to certain collateralized loan and debt obligation equity
interests in full satisfaction of the claims of the note holders.
ACA Financial Guaranty will operate as a run-off financial guaranty insurance company,
meaning it will not issue any new insurance policies or guarantees and will exist
to adjust, defend and pay claims on its in-force book of financial guaranty insurance
policies, virtually all of which relate to exposure on municipal debt obligations.
The Company is pleased to have been able to engineer a comprehensive solution to
ACA Financial Guaranty's financial situation that it believes is for the mutual
benefit of all its policyholders. ACA Capital's financial advisor for the restructuring
was The Blackstone Group.
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Founded in 1997, ACA Financial Guaranty Corporation is a monoline bond insurance
company licensed in 50 states and 5 territories and regulated by the Maryland Insurance
On August 8, 2008, the Company and counterparties to its structured finance products
reached an agreement on a restructuring plan for ACA. The plan, approved by the
Maryland Insurance Administration, provided for settlement of the structured finance
obligations and protection for ACA’s municipal policyholders. ACA will operate as
a runoff insurance company and focus on actively managing its remaining insured
ACA’s portfolio consists of more than 300 obligors guarantying timely payment
of principal and interest on approximately $4.3 billion of generally high yield municipal