Syncora Guarantee Inc.’s claims that a California law diverting redevelopment agency funds to the state jeopardizes bond payments are premature, a state judge ruled, saying no redevelopment agency bonds are in default.
Judge Michael Kenny in Sacramento denied bond insurer Syncora any relief on claims in a lawsuit it filed last year that bond contracts were impaired by a California law that abolished redevelopment agencies and channeled their funds toward education, road and fire departments.
Four hundred redevelopment agencies in California were dissolved under the law, passed to avoid a shortfall in money for schools and other projects. Taxes going to the agencies were blended in caretaker funds run by local governments that pay investors.
Syncora claimed that the contracts irrevocably pledged tax revenue to bondholders. More than $11 billion in redevelopment agency bonds were cut to junk status because of uncertainty about repayment caused by the law, company lawyers said in court filings.
Kenny ruled that Syncora could present evidence that it’s suffering damages and losses even though no bonds have defaulted.
Michael Corbally, a spokesman for Bermuda-based Syncora Holdings Ltd. (SYCRF), parent of Syncora Guarantee, didn’t immediately respond to an e-mail seeking comment on the ruling after regular business hours.
The case is Syncora Guarantee Inc. v. State of California, 2-80001215, California Superior Court, Sacramento.
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