Shares Of Puerto Rican Bond Insurers Tick Higher Following Encouraging Developments

Shares of MBIA Inc. (NYSE: MBI) and Assured Guaranty Ltd. (NYSE: AGO) were trading higher by more than 3 percent in Wednesday's premarket following encouraging news out of Puerto Rico.

Shares of Assured recently traded up about 2 percent, while MBIA was nearly flat on the day.

MBIA and Assured Guaranty jointly guarantee $9.4 billion worth of Puerto Rico's debt. Both companies saw its stocks decline sharply after Puerto Rico's Governor Garcia Padilla told the New York Times that its debt is "unpayable."

Puerto Rico holds around $73 billion of debt.

CNBC reported that Puerto Rico's power authority PREPA is close to a finalized deal with creditors which will avoid a default on the roughly $400 million payment due Wednesday. The report noted that the payment would likely be partly financed by the insurers who back the bonds.

Investors were also encouraged by reports on Tuesday that the government is in a position to make a July 1 coupon payment of $645.2 million on its general-obligation debt. The government also made a final payment of $265.5 million on a $900 million bank loan to a syndicate of banks on Tuesday.

Commenting on the development, Richard Larkin, director of credit analysis at financial services firm HJ Sims told CNBC that major bond insurers of Puerto Rico's debt "could probably" handle a default but it depends on how much the government will negotiate with bondholders.

Pedro Pierluisi, Puerto Rico's representative in Congress also told CNBC that "there is no reason why we won't be meeting those obligations in the near term" but did note that "there is so much we can do and should do right now, next year and the following year."