Las Vegas Monorail bond payment in jeopardy amid Ambac rehabilitation

By Caroline Salls

Pittsburgh, March 26 - Las Vegas Monorail Co. revenue bond insurer Ambac Assurance Corp. will most likely fail to honor surety bond and bond insurance policy claims in connection with Ambac's rehabilitation, which will result in a default on the $9.63 million interest payment due July 1 on Las Vegas Monorail's first-tier series 2000 revenue bonds, according to a bondholder notice.

According to the notice from bond trustee Wells Fargo Bank, NA, Ambac insured payment of the principal, interest and accreted value on the first-tier bonds and issued a surety bond representing one-half of the debt service reserve requirement for the bonds, with a maximum $20.99 million of surety bond coverage.

Wells Fargo said draws were made on the surety bond to partially pay interest due July 1, 2009 on the Las Vegas Monorail bonds and to fully pay interest due on Jan. 1, leaving $459,036 of coverage on the surety bond.

The trustee said it expects there to be minimal, if any, funds received from Las Vegas Monorail to make the July 1 interest payment, and the cash balance of the debt service reserve fund has been depleted to zero.

As a result, the company's ability to make any payment on July 1 would be dependent on receiving funds from Ambac under the surety bond and bond insurance policy.

However, Wells Fargo said Ambac has established a segregated account for some of its liabilities, including the surety bond and bond insurance policy, and the Office of the Commissioner of Insurance of the State of Wisconsin launched rehabilitation proceedings against that account on Wednesday.

Wells Fargo said no claims are expected to be paid on segregated account policies until a rehabilitation plan is approved, which is expected to occur within about six months.

The trustee said it has retained Locke Lord Bissell & Liddell LLP as special insurance counsel to represent it in the rehabilitation proceedings and other matters related to the bond insurance policies.

The company, a Las Vegas non-profit monorail operator, filed for bankruptcy on Jan. 13 in the U.S. Bankruptcy Court for the District of Nevada. The Chapter 11 case number is 10-10464.

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