Syncora in Tender Offer Integral to Its Successful Restructuring

July 15, 2009

Cleary Gottlieb represented BSG Markets LLC and Deutsche Bank Securities Inc. as dealer managers in the tender offer that was an integral part of the successful restructuring of Syncora Guarantee Inc. Syncora played a significant role as a monoline insurer of residential mortgage backed securities and its financial position deteriorated following the market collapse in 2008. Syncora was able to avoid rehabilitation proceedings under New York State insurance laws as a result of a series of transactions consummated upon the completion of the tender offer. The tender offer, made to 55 classes of RMBS insured by Syncora, closed on July 15 and allowed Syncora to effectively commute approximately $3.8 billion of insured RMBS and approximately $1.2 billion in loss and loss reserves associated with Syncora’s RMBS portfolio.

The tender offer involved a novel structure where a Cayman special purpose company financed by Syncora made a tender offer for Syncora insured RMBS in exchange for a cash payment plus a trust certificate generally representing the economics of the uninsured RMBS. Upon settlement of the offer, the RMBS were deposited into trusts against the receipt of two trust certificates: one certificate representing the uninsured cash flows of the deposited RMBS and the other representing the insurance cash flows of the deposited RMBS. The certificates representing the uninsured RMBS were returned to holders participating in the tender offer and the certificates representing the right to the Syncora insurance payments were distributed to Syncora. The transaction also involved negotiating a series of swap and forward purchase transactions to remediate additional Syncora RMBS exposure with multiple institutional investors.

The closing of the Syncora transaction was the culmination of over eight months of work by the Cleary Gottlieb team and marks Cleary Gottlieb's continued and significant involvement in restructuring a segment of the insurance industry devastated by the recent economic downturn.