Assured Guaranty Ltd. yesterday said it had cleared a U.S. antitrust hurdle in its proposed acquisition of Financial Security Assurance Holdings Ltd. from Franco-Belgian bank Dexia.
The company's waiting period under the Hart-Scott-Rodino antitrust law expired 11:59 Tuesday night, giving the company clearance, Assured said. Under the law, the companies had to send notice of the proposed merger to the Federal Trade Commission and the Justice Department, which could have then requested additional information to investigate any antitrust concerns.
The companies' bond insurance subsidiaries, Assured Guaranty Corp. and Financial Security Assurance Inc., wrapped more than 90% of insured bonds that came to the market in 2008. But the bond insurers also compete against alternate forms of credit enhancement, such as letters of credit, and issuers simply entering the market uninsured.
The deal still needs a number of other regulatory approvals, including from state insurance departments, and the approval of shareholders. Assured said it excepts to hold a special general meeting of its shareholders in March to vote on the deal, although it has not set a date.
In addition, Assured and Dexia are still working on a number of agreements to ensure the risks and liabilities of FSA's financial products unit - which was excluded from the deal - remain with Dexia.
Although FSA avoided backing the collateralized debt obligations of asset-backed securities that plagued many of the downgraded bond insurers, it has lost hundreds of millions of dollars due to its exposures to the U.S. housing market through that unit.
Assured said it is working to complete all closing conditions by the end of the first quarter. Dexia in a separate press release said it plans to close the transaction in the spring.
Dexia, itself one of the market's top credit enhancers last year, agreed to the transaction in November as part of a restructuring plan. Dexia's board of directors mandated the company reduce its exposure to FSA following a shakeup that occurred after a number of European governments joined to prop up the bank amid the global credit crisis last year.
Assured also yesterday released a number of presentations it made to executives at Moody's Investors Service after getting put on review for downgrade in the middle of last year.
In one presentation, dated Sept. 12, Assured argued that the issues Moody's raised based on future developments were "very hypothetical." Assured also said it is "not appropriate to extrapolate Assured's performance from Ambac/MBIA's experience" because "Assured's portfolio is far less exposed to high volatility risks."
Moody's in November downgraded both Assured and FSA, just one day after releasing a report questioning the viability of any standalone triple-A guarantor. Assured is now rated Aa2 by Moody's, while FSA is rated Aa3.
Standard & Poor's and Fitch Ratings rate both companies AAA, but have FSA on negative watch.
