Municipal market veteran Faye Boatright has joined BondFactor Co. in New York, sources confirmed Friday. If the firm sounds unfamiliar, that’s because the name recently changed from BondModel, the bond guarantor start-up.
It’s unclear what caused the makeover, but the company said in an e-mail that only the name has changed. BondFactor is “a newly formed holding company that will perform all activities previously contemplated to be performed by” BondModel, it said.
Boatright joined BondFactor as chief of issuer marketing in late March, after spending the past year growing the Northeast business for Rice Financial Products, where she was managing director.
“It’s a unique opportunity to help build a business,” she said. “When we roll out the product, I’ll be in charge of marketing it to everyone that’s involved on the primary market side, which is issuers, financial advisers, legal counsel, and investment banks — anybody involved in the new-issue side of the process.”
The insurer was founded by former public finance people from Goldman, Sachs & Co,, including chief executive officer George H. Butcher and president Bradley W. Wendt.
Boatright herself worked alongside both men during her tenure at Goldman from 1992 to 2004.
While there, she spent six years working on municipal deals, primarily doing infrastructure projects in the Northeast and Midwest. Boatright then spent six years on the corporate side, an experience that later helped in tackling the taxable Build America Bonds market, she said.
Boatright also sits with Butcher on the board of governors for the Municipal Forum of New York.
After her time at Goldman, Boatright joined the financial advisory firm A.C. Advisory and helped founder Adela Cepeda launch a broker-dealer in 2005.
The following year, Boatright became an executive director at Morgan Stanley, where for three years she worked as a general government and transportation banker. Her work there included several large deals, including as lead banker on $2.8 billion of extendable taxable notes for the Florida Hurricane Catastrophe Fund.
In her new role, Boatright joins BondFactor in a precarious time for both the company and the insurance industry as a whole.
Earlier this year, BondFactor said it planned to enter the market in the second quarter. However, it hit some hurdles in late March when two key executives — John Pizzarelli, the chief operating officer hired last October, and Steven Citron, the chief risk officer hired in late January — departed for undisclosed reasons.
On Friday, Wendt wrote in an e-mail that the company is now in a “quiet period as we await the outcome of developments currently in process as regards the firm.”
Meanwhile, the broader municipal market is operating with just one insurer.
Through its two platforms, Assured Guaranty Ltd. guaranteed 6.3% of primary market issuance in the first quarter, according to Thomson Reuters.
Before the credit crisis, more than 50% of new issuance was routinely insured by nine competitors. But most of them collapsed or entered a restructuring period after the exotic finance products that they guaranteed — such as asset-backed securities — turned toxic.
None of the start-ups or restructured entities have ratings high enough thus far to enter the market, and analysts say if bond insurers are to see a major resurgence, more competition is needed.
BondFactor’s success will depend on the acceptance of its complicated insurance model, which it claims is more efficient.
Traditional bond insurance allows municipalities to substitute, for a fee, the financial strength and credit rating of the insurer, which agrees to pay timely interest and principal to investors if the bond defaults.
By contrast, BondFactor plans to allow some of the costs associated with insurance to be paid by investors rather than the company, thus reducing the cost of credit enhancement.
The model works by pooling together uninsured municipals, and then issuing a low-risk senior note and a higher-risk junior note based on that pool for investors.
If a bond in the pool defaulted, investors in the senior note would be fully compensated before any money would flow to the junior note.
Moreover, if there were not enough money to compensate the senior investors, BondFactor said it would use its own resources to pay them in full.
The model requires less capital than traditional insurance because the junior tranche of the pool provides credit support to the senior tranche, in addition to the company’s own liquidity guarantee.
BondFactor’s website, still at www.BondModel.com, remains under construction, but displays the following slogan: “Charting the new course for municipal guarantees.”