NEW ORLEANS (CN) – The owner of the Louisiana Superdome paid Financial Guaranty Insurance Co. $13 million to insure $238.5 million in auction-rate bonds, an expense which is “essential(ly) worthless” because of the collapse of FGIC’s credit rating, the Louisiana Stadium and Exposition District claims in Federal Court.
The LSED says the bond auction failed and the interest rate on its bonds was rest to the penalty or maximum rate.
“FGIC has been and will be sued by issuers and bondholders based upon various different theories in various courts throughout the United States,” the complaint states. “Unlike other suits, this suit arises under Louisiana law. Because FGIC may eventually become insolvent, time is of the essence in the determination of this case.”
The stadium district accuses FGIC of “misrepresenting and suppressing the truth regarding the sustainability of FGIC’s AAA credit rating,” which constitutes fraud. It also claims FGIC is liable “under the law of detrimental reliance. The LSED relied upon the representations of FGIC regarding its ability to provide credit enhancement for the bonds, its creditworthiness, its strength as a guarantor, and its commitment to safeguard the creditworthiness through underwriting to the remote-loss standard, to the LSED’s detriment.”
The district is represented by James Swanson with Fishman Haygood & Phelps.