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FSA Leads Insurance Rankings

Much as expected, credit market turmoil reverberated through bond insurer and other credit enhancement rankings through the first half of the year.

The downgrades to most monolines allowed the remaining triple-A bond insurers to gain larger shares of a significantly smaller market, according to Thomson Reuters data.

With the total volume of wrapped deals down to $53.7 billion from $112.4 billion through the first six months, leader Financial Security Assurance Inc. controlled more than half the market, with a 53.2% market share through June. It has backed 1,099 issues with a par value of $31.6 billion, compared to $23.3 billion on 878 issues through June last year.

Similarly, second-ranked Assured Guaranty Corp. had insured $16.2 billion on 486 issues for a 28.3% market share through the first six months of 2008. All of last year, it wrapped just $3.6 billion. Berkshire Hathaway Assurance Corp., the third triple-A rated insurer, made its first appearance in the Thomson Reuters data, ranking fifth with two deals worth a total of $361.2 million.

Downgraded insurers saw business evaporate. MBIA Insurance Corp. and last year's leader, Ambac Assurance Corp., ranked third and fourth, insuring $1.2 billion and $484.2 million, respectively, through June. MBIA had wrapped $23 billion and Ambac had wrapped $27 billion through the first six months of last year.

However, demand for other forms of credit enhancement has boomed as more issuers turn to variable-rate demand obligation bonds because of the virtual freezing of the auction-rate market.

With letters of credit, leader Bank of America provided $9.6 billion in LOCs through June, more than the $7.3 billion all banks combined to provide by this point last year. Much of that has come in the second quarter as restructuring of auction-rate securities accelerated. Bank of America had provided just $1.2 billion letters of credit through March.

JPMorgan sits a distant second, providing letters of credit worth just under $4 billion on 73 issues. A total of $40.6 billion letters of credit have been provided through the end of June.

Standby purchase agreements also saw greater demand. Leader Dexia Group, with 28.8% market share, has provided $6.64 billion in standby purchase agreements, more than the $6.55 billion the entire market had provided in the same period last year.

Again, JPMorgan ranks second, providing standby purchase agreements totaling a par value of $4.1 billion on 41 issues, compared to the $197.6 million that ranked it 10th at this point last year.

The bond counsel rankings remained unchanged at the top, with Orrick Herrington & Sutcliffe LLP again leading the way. With full credit given to each bond counsel, the firm has worked on 227 issues for a total par value of $27.9 billion, or 12.3% share of the market. It had worked on $32.8 billion in deals as of June 30 last year.

Last year's second-place firm, Hawkins Delafield & Wood LLP, also held its position, working on $13 billion in deals on 177 issues through the end of June, compared to $12.3 billion on 175 deals at this point last year.

Helped by turmoil in the bond insurance market, Sidley Austin LLP showed significant gains. It moved to third place in the rankings, working on 89 issues worth a par value of nearly $12 billion. It had worked on just 43 issues worth $6.7 billion at this point last year.

"As a firm, we focus on larger municipal issuers with more complex transactions, and in many cases, it's those issuers that have had to restructure because of the monoline meltdown," said Eric Tashman, head of Sidley Austin's West Coast public finance practice group.

Orrick and Hawkins continued to top the negotiated rankings. Orrick completed $21.5 billion in deals, while Hawkins has worked on $11.83 billion, with equal credit given to each counsel.

On the competitive side, the rankings saw more movement. With equal credit given to each bond counsel, Sherman & Howard took the top spot, working on 14 issues with a par value of $1.86 billion, after placing fourth at this point last year. Squires Sanders & Dempsey LLP placed second, working on $1.35 billion in deals on 19 issues, after placing fifth at this point last year. Foster Pepper PLLC, which ranked first through the first quarter of this year, fell to third, with $1.2 billion of work on 7 issues.

For underwriter's counsel, Nixon Peabody LLP held firm atop the charts. It worked on 78 issues worth $14.1 billion through June for a market share of 8.2%, with full credit given to each counsel. Orrick rebounded from a weak first quarter to place second, working on 90 issues worth a par value of $9.9 billion.

Orrick also placed as the top disclosure counsel, working on 40 issues worth a par value of $6.7 billion.

Bond trustee rankings remained steady. Bank of New York Mellon held on to its top spot, working on $53.6 billion on 641 issues for a market share of 38.8%, with equal credit given to each trustee. U.S. Bank NA and Wells Fargo Bank continue to rank second and third, respectively, working on deals worth $37.2 and $22.4 billion.

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