Assured Guaranty Climbs to One-Month High After Reporting Profit

Assured (AGO) Guaranty Corp. rose to the highest in more than a month after the bond insurer reported profit that beat analyst estimates.

Shares climbed 3.6 percent to $12.83 in New York Stock Exchange composite trading, capping a 12 percent gain on the week and reaching the highest since July 6. Credit-default swaps on the company declined 1.5 percentage points to 12.3 percent upfront, according to data provider CMA. That means investors pay $1.23 million initially and $500,000 annually to protect $10 million of Assured debt from losses for five years.

Second-quarter operating income declined 20 percent to $114 million, or 61 cents a share, the Hamilton, Bermuda-based company said in a statement yesterday after the close of the stock exchange. That beat the average estimate of 52 cents a share in a Bloomberg survey of four analysts.

Assured said in court papers today that Stockton, California, isn’t eligible for bankruptcy protection and that the city’s case should be dismissed because it failed to negotiate in good faith with creditors and hasn’t proved that it is insolvent. Stockton is trying to force the bond insurer to accept $100 million in losses instead of seeking more concessions from labor unions, the company said.

Stockton filed a Chapter 9 bankruptcy on June 28 after months of talks failed with creditors, including Assured and labor officials. Stockton said it filed after negotiating with creditors on an out-of-court restructuring of its debts. The bankruptcy case is In re Stockton, 12-32118, U.S. Bankruptcy Court, Eastern District of California (Sacramento).

Credit-default swaps, which typically fall as investor confidence improves, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. CMA is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net