Assured Guaranty Ltd.'s plans to acquire Financial Security Assurance Holdings Ltd. advanced yesterday as shareholders approved stock issuance related to the deal and the New York Insurance Department approved the transaction.
More than 99% of shareholders present approved both of Assured's proposals. One allows the company to issues shares to FSA's current parent, Dexia, and another gives the board the power to issue shares to a Wilbur L. Ross-affiliated fund if needed to finance the transaction.
"We are pleased to have both of these approvals, which were necessary for us to move forward with our acquisition of FSA," Assured president and chief executive officer Dominic Frederico said in a statement. "We are working to finalize the remaining requirements for this transactions on a timely basis and will continue to evaluate our options for funding the cash portion of the purchase price beyond the use of the existing equity commitment."
Assured now says it expects to close the acquisition during the second quarter. It still needs approval from the Oklahoma Insurance Department and assurance from all three rating agencies that the transaction will not have a negative impact on either companies' ratings.
The transaction will put under one roof the industry's two most active bond insurers - Assured Guaranty Corp. and Financial Security Assurance Inc.
Executives at Assured Guaranty Ltd. have said they plan for both companies to maintain their insurance licenses.
Assured has dominated the market for bond insurance this year, wrapping 332 issues with a par value of $7.2 billion, a market share of 75%, according to Thomson Reuters. FSA has provided insurance on 96 issues with a par value of $917.4 million.
Assured is rated Aa2 by Moody's Investors Service and AAA by Standard & Poor's and Fitch Ratings. FSA is rated Aa3 by Moody's and AAA by Standard & Poor's and Fitch, which both have the insurer on negative watch.
Both Assured and FSA have incurred losses due to direct residential mortgage-backed securities exposures, but they avoided wrapping the collateralized debt obligations that doomed their other rivals. FSA, however, faced additional pressure from troubles at its financial products unit, which provided guaranteed investment contracts.
The financial products unit is not included in the sale. Dexia and the French and Belgian governments will retain all responsibilities and risks for the business.