Ambac Financial Group, through its subsidiary Ambac Assurance Corporation, which provides financial guarantees and other financial services, has filed a lawsuit in response to the recently completed extension by the Puerto Rico Highways and Transportation Authority (PRHTA) of its concession agreement with the consortium Autopistas Metropolitanas de Puerto Rico LLC, which may cause US$115 million in value to be extracted and diverted from PRHTA. 

Autopistas Metropolitanas de Puerto Rico LLC consortium, which manages the PR-5 and PR-22 toll roads, is formed by Abertis Infraestructuras S.A. (owning 45%), GS International Infrastructure Partners II L.P. (32%), and GS Global Infrastructure Partners II L.P. (23%). T

The complaint, which alleges breaches of contract and fiduciary duty and seeks appointment of an interim receiver for PRHTA, was filed in the United States District Court for the District of Puerto Rico.

The extension agreement, executed by PRHTA in April 2016, amends an existing concession agreement for the PR-5 and PR-22 toll roads by extending the lease by 10 years and reducing PRHTA's allocated share of toll revenues generated by an advanced toll system. 

The complaint alleges that the extension agreement was improvidently entered into by PRHTA because PRHTA has no control over, and is unlikely to receive, the proceeds of the transaction. Puerto Rico law gives the Governor control over the proceeds, and he may apply them for purposes unrelated to PRHTA.

The complaint alleges that the sale of PRHTA's assets in these circumstances is just the latest instance of mismanagement and breach of fiduciary and contractual duties by a hopelessly conflicted PRHTA Board of Directors. 

In addition, the complaint alleges PRHTA's failure to take advantage of US$750 million in federal toll credits, its failure to timely issue financial statements, and its continuing refusal to provide contractually required financial disclosure to Ambac Assurance and other financial guaranty insurers.

Nader Tavakoli, President and Chief Executive Officer of Ambac, said: 

"The PRHTA board's decision to monetize over $100 million of unencumbered assets in a manner that allows the money to be taken by the GDB or used to pay Commonwealth debt at this time is a clear abdication of their duties. We believe the appointment of a receiver is essential to reducing conflicts of interest, improving transparency, and protecting the interests of creditors.  We continue to urge the governor to engage in good faith negotiations aimed at consensual agreements with the creditors of the PRHTA and Puerto Rico in general."