1995 0726 and 0727 - GOV (House) - Debt Issuance and Investment Practices of State and Local Governments, Richard Baker (R-LA) - [PDF-1011p-GooglePlay]
Richard C. Lehman, President, Bond Investors Association
(p150) 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.
House - Committee on Banking and Financial Services - Subcommittee on Capital Markets, Securities, and Government Sponsored Enterprises