Davis Polk advised 23 financial institution counterparties holding credit default swap and financial guarantee exposure to monoline insurer Syncora Guarantee Inc. in connection with a comprehensive restructuring of credit default swap and financial guarantee obligations aggregating over $160 billion to remediate the Syncora’s policyholders’ surplus deficit.

The restructuring included three primary components: (1) the commutation of substantially all of Syncora’s CDS portfolio for which reserves were taken or losses were expected with respect to ABS CDOs and substantially all financial guarantee exposure to ABS CDOs with expected losses; (2) the remediation of expected losses on Syncora’s insured RMBS; and (3) the creation of Syncora Capital Assurance Inc., a new wholly owned financial guaranty insurance subsidiary of Syncora Guarantee that reinsured or assumed certain insured public finance and selected global infrastructure bonds and substantially all financial guarantee insurance policies issued on any CDS contracts not subject to commutations. The transactions effectively commuted or restructured all of Syncora's $56 billion of CDS exposure and restructured or commuted in aggregate approximately $110 billion of par bonds insured.

Upon closing, the financial counterparties received aggregate cash commutation payments of $1.2 billion along with approximately 40% of the aggregate equity ownership of Syncora Holdings Ltd. and surplus notes issued by Syncora Guarantee of an aggregate amount of $625 million.

The Davis Polk corporate and restructuring team included partners Donald S. Bernstein, Joseph P. Hadley, Michael Kaplan and John J. McCarthy Jr., associates Lynn Poss, Hilary Dengel, Brian J. Snyder, Brian M. Resnick, William J. Chudd, Dessislav Dobrev, Meyer C. Dworkin and Adam Rachlis and summer associates Alex Kardon and Jonah A. White. Partner Ethan T. James and associates Michel Beshara, Pengyu Jeff He and Brian Wolfe provided insurance regulatory advice. Partner Kathleen L. Ferrell and associates Jason Rubin Sussman, Kevin J. Brogan and Yuliya Epifantseva provided tax advice. The legal assistants for this matter were Fatima Santos and Richard A. Harrison. All of the Davis Polk team members are based in the New York office.