• An interesting question arising in third-party guaranteed defaults is what happens when the guarantor collapses
• When the letter-of-credit bank or insurance company goes under, or the corporate guarantor goes bankrupt, there is no more credit enhancement or guarantee on the bond issue.
• In these instances bondholders usually lose.
• Such was the case with the $1.6 billion of munis backed by Executive Life and the $600 million of housing issues backed by Mutual Benefit Life Insurance Company.  (p150)

-- C. Richard Lehmann, President - Bond Investors Association From 1994 "The Handbook of Municipal Bonds" CHAPTER 33: Municipal Bond Defaults

1995  - GOV (House) - Debt Issuance and Investment Practices of State and Local Governments - 968p

• House - Committee on Banking and Financial Services - Subcommittee on Capital Markets, Securities, and Government Sponsored Enterprises