Creditors are taking control of the troubled insurer that guaranteed the $77 million in bonds issued by a California state bank for Napa's Copia: the American Center for Wine, Food and the Arts.
The restructuring of Baltimore-based ACA Financial Guaranty Corp. aims to protect investors who bought a total of $7.3 billion in bonds in 2007 if the ventures financed with them fail.
Insurance was key to the state bank's backing of Copia's bonds despite ongoing financial problems at the wine and food mecca.
The takeover deal, approved by Maryland insurance regulators last month, sets aside enough money to honor insurance claims against ACA Financial-backed bond financing between now and 2045.
Maryland Insurance Commissioner Ralph S. Tyler outlined terms of the deal in a regulatory order set to be finalized by Dec. 19. It will allow ACA Financial to operate solely as a "run-off" insurer which can no longer write new bond insurance policies without Maryland's approval.
"I feel that all the parties involved have made the best of a difficult situation," Tyler said in a statement.
"The objectives have always been to make sure that the individuals relying on municipal obligations insured by ACA are protected."
Stanley Hazelroth, head of the California Infrastructure and Economic Development Bank, said his bank never doubted the bond insurer would be able to make required payments "in the event they are called upon to do so."
I-Bank, a tiny, state-owned institution, endorsed a $77 million bailout of Copia last year even as the museum was insolvent and facing IRS accusations of violating its nonprofit status with too many for-profit activities. I-Bank also had authorized the first bond offering for Copia in 1999, for $70 million, which allowed construction of the center's lavish buildings and grounds.
As a third party, I-Bank maintains it is not liable for the bonds, but its former chairman expressed concern about Copia's financial instability before the second round of bonds were approved. That approval hinged on ACA's insurance.
The creditors who now control ACA Financial had bought insurance for $22 billion in asset-backed securities transactions involving sub-prime mortgages that later collapsed.
Call The Bee's Andrew McIntosh, (916) 321-1215.
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