Assured's FSA Buy Needs to Close Soon, French Official Says

France's top economic official said Assured Guaranty Ltd.'s purchase of Financial Security Assurance Ltd. should close soon so that a restructuring of FSA's parent, Franco-Belgian bank Dexia, can continue, according to an interview published Monday by a French business daily.

Economic Minister Christine Lagarde told Les Echos the deal awaits the approval of the European Commission, the executive branch of the European Union. Assured in November agreed to purchase FSA - excluding its troubled financial product unit - from Dexia as the Franco-Belgian bank looked to unload the U.S. bond insurer as part of its restructuring plan.

"The need right now is the transfer of U.S. credit enhancer FSA, which will clean the balance sheet," Lagarde said. "The transaction should close soon."

The deal still needs clearance from officials in both the United States and Europe and approval from shareholders, Assured said.

"Assured is working on all the regulatory approvals as well as setting up shareholder meetings and getting the necessary guarantees, which will determine the timing of the transaction," said Ashweeta Durani, vice president of global communications for Assured.

Although FSA largely avoided backing the collateralized debt obligations of asset-backed securities that doomed other insurers, it had other exposures to the U.S. housing market that led to hundreds of millions of dollars in losses. Dexia will hold onto the FSA's troubled financial products unit as part of the deal, with the governments of France and Belgium guaranteeing the unit's assets.

The deal will mark the latest shakeup in the bond insurance industry, which saw its competitive landscape shift dramatically amid the downgrades related to structured finance exposures. FSA and Assured wrapped more than 90% of insured bonds last year, with almost of all of their primary competitors having their credit ratings slashed, in some cases to junk status.

Financial Security Assurance Inc. ranked as the top bond insurer last year, wrapping 1,418 deals with a par value of $39.2 billion, while Assured Guaranty Corp. ranked second, wrapping 1,002 deals with a par value of $26.5 billion. Assured topped FSA in the fourth quarter, though, wrapping 286 issues with a net par value of $4.29 billion.

Executives at Assured have said they plan for both companies to keep their insurance licenses and to continue to write new business. FSA last summer announced it would stop writing structured finance business to focus on public finance deals.

Moody's Investors Service in November downgraded Assured to Aa2 and FSA to Aa3 following a report in which it questioned the viability of any stand-alone insurer receiving a triple-A rating.

Both companies retain their AAA ratings from Standard & Poor's and Fitch Ratings, although both agencies have FSA's rating on negative watch.

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