Assured Guaranty wraps first bond in five years

Monoline insurer Assured Guaranty announced a milestone last week with its first bond ‘wrap’ since 2008. 

The firm will guarantee a 19-year, £100 million (€118 million; $154 million) bond that will be used to finance a UK social housing Private Finance Initiative (PFI) deal in Leeds. The “publicly listed bond financing” will price at the end of June, Assured Guaranty said. Lloyds Bank will act as bond lead arranger and will be responsible for marketing the bonds to institutional investors. 

Nick Proud, chief executive of Assured Guaranty Europe, was bullish on the deal, saying it “revalidates the monoline business model” and signalling the transaction “will be the first public primary PFI bond in Europe since the start of the global credit crisis in 2008”. Proud also stressed the monoline wrap “was chosen as the most cost-effective solution for the consortium” spearheading the housing deal. 

Equitix, SWIP Infrastructure Funds, Keepmoat and project manager Sweett Group have been named preferred bidder for the deal, which will see the consortium refurbish over 1,200 homes and build 388 new ones. Leeds Council will back the deal with availability payments. 

Last year, Assured Guaranty made a comeback with a £97 million deal where it replaced fellow monoline Ambac as guarantor on a hospital PFI bond maturing in 2030. Most monolines were hit hard by the global financial crisis, losing their AAA ratings after guaranteeing risky subprime-related investments.

Shortly after that transaction, Dominic Nathan, Assured Guaranty’s head of European operations, told Infrastructure Investor he saw the monoline insurer as part of a group of four or five solutions that will provide infrastructure investors with access to the capital markets going forward. 

He also shed some light on how Assured Guaranty would go about investing nowadays: 

“Our capacity constraint is really on a per deal basis,”Nathan said. “On a replacement deal like Worcestershire [hospital], we can probably do up to £500 million per deal – which incorporates most of the market, but not all of it. On new deals, it’s probably slightly less, maybe up to £350 million. That’s the constraint on a deal basis – we don't expect to be constrained by country or sector limits,” he explained.

Recently, a consortium led by French fund manager Meridiam managed to fund a UK university PFI deal with a 41-year, £145 million, index-linked unwrapped bond, a deal the team called “the first of its kind to be implemented in Europe”.