Assured Guaranty is suing Puerto Rico’s federal oversight board over its decision to push the Caribbean island’s electric utility into bankruptcy.

The Bermuda-based firm insures some of the bonds issued by Prepa, as the utility is known, and the bankruptcy comes after the rejection of a longstanding debt-restructuring agreement with creditors.

It marks the end of nearly four years of negotiations between Prepa, hedge funds, mutual funds and bond-insurance companies including Assured to find an out-of-court solution to reduce the agency’s obligations and modernise its system.

Dominic Frederico, chief executive officer of Assured, said the decision “makes clear that the oversight board is not seriously seeking the consensual resolutions with creditors that Promesa was intended to encourage.

“The rejection of this consensual agreement will force Prepa into years of litigation, costing millions of dollars and driving up costs for customers,” Mr Frederico added.

A statement from Assured Guaranty said the company would “vigorously exercise its rights and remedies as guarantor of Prepa Special Revenue bonds, which benefit from special protections under bankruptcy law. Payments to holders of Prepa bonds insured by Assured Guaranty will continue to be paid without interruption for the life of the bonds”.

Last week, Standard and Poor’s Global Ratings affirmed Assured’s AA financial strength rating.