Bond insurers, legal counsel shake off slow start as Assured, Orrick top rankings

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The municipal bond market's slow start cut into business for bond insurers and legal counsel, as Assured Guaranty and Orrick Herrington & Sutcliffe LLP stayed atop the rankings for the first half of 2018.

The par amount of bonds insured fell 23.2% from a year earlier, while bond counsel par amount slipped 17%, even as issuance improved from the first quarter.

Assured insured $5.13 billion of par value in 283 transactions in the first half of 2018, according to data from Thomson Reuters. That compares with $7.03 billion in 439 deals a year earlier. The figures include Assured's subsidiary Municipal Assurance Corp.

“In the municipal market, first-half par volume and deals issued were down 17% and 19%, respectively, compared with last year’s first half, largely due to decreased refundings in the aftermath of tax reform and the rushing of some new issues into year-end 2017,” said Robert Tucker, senior managing director of communications and investor relations for Assured. “Insured volume also declined, and in this environment, Assured Guaranty focused on transactions that provided comparatively more premium dollars and better returns over the long term.“

Assured wrapped $2.24 billion for a 62% market share in the first quarter and $2.88 billion and 53% market share for the second quarter, resulting in a market share of 56.7% for the first half.

“Most of the transactions that were pushed forward to 2017 would have otherwise occurred in the first quarter, and the second quarter saw a significant rebound in both issued and insured volume,” said Tucker. “Our second-quarter primary-market insured par sold was 29% higher than in the first quarter. Including 222 small, medium and large new issues and secondary-market policies, our total second-quarter insured par sold exceeded $3 billion.”

Bond insurance industry penetration edged up to 5.63% in the second quarter from 5.59% at the end of the first quarter, to end the first half at 5.62%. That is an improvement from the 5.29% penetration rate the insurers had at the end of 2017.

“We have continued to benefit from institutional investors’ preference for Assured Guaranty insurance on larger transactions,” Tucker said. “In the second quarter, we were selected on eleven different transactions to insure more than $50 million of par, including four deals with a combined par of $774 million where we insured more than $100 million of par on each deal.”

Build America Mutual finished the first six months of the year with a par amount insured of $3.92 billion in 343 transactions or 43.3% market share. That compares to the $4.17 billion over 355 deals or 35.3% market share during the first half of 2017.

“The market’s rebound in the second quarter allowed BAM to more than double primary-market activity versus the first quarter,” said Sean McCarthy, CEO of BAM. “In particular, the increase in the number of longer-term new-money sales in the market meant that issuers had more opportunities to use insurance to realize savings, and strong demand for BAM’s guaranty from institutional investors drove an 11% year-over-year increase in the average size of BAM’s primary insured transactions.”

BAM wrapped $1.39 billion in the first quarter or 38% market share and for the second quarter, accumulated $2.53 billion or 47% market share.

“Highlights included a $100 million water and sewer revenue bond sale for Shreveport, Louisiana, and $91 million of general obligation bonds for the City of New Britain, Connecticut,” McCarthy said. “BAM’s secondary market business also continued to expand under the leadership of Grant Dewey, who completed his first full quarter at BAM as head of municipal capital markets.”

Legal counsel
Orrick accounted for $21.59 billion in 178 deals or 13.9% market share among legal counsel in the first half of 2018, down from $26.33 billion in 106 deals or 13.1% market share.

“We are very proud to be ranked number one as bond counsel both in dollar volume and number of issues,” said Justin Cooper, partner at Orrick, co-chair of its public finance practice and affordable housing finance group. “In spite of the general market being off substantially, we are more than holding our own, with bond counsel market share more than double the next competitor in dollar volume.”

Cooper added that with the recent expansion of its Texas presence, the firm has the most attorneys dedicated full-time to public finance of any firm in the country.

“We recently celebrated a significant milestone in that more than 50% of Orrick public finance attorneys are diverse – we think we may be alone in this respect among public finance practices at large law firms,” he said.

Norton Rose Fulbright came in second with $9.83 billion or 6.3% market share, moving up from third place at this time last year when the firm provided counsel on $10.04 billion.

Hawkins Delafield & Wood LLP was next with $6.66 billion or 4.3% market share with 135 deals, down from the $12.87 billion or 6.9% market share over 76 deals during the year before. Hawkins did however finish the first half atop the underwriters counsel ranks once again.

“Hawkins finished the first half of 2018 with the second most aggregate volume as underwriters’ counsel (first), disclosure counsel (second), and Bond Counsel (third), with a total volume of $28.6 billion in full credit tables,” said Howard Zucker, managing partner at Hawkins. “As for lawyers who act as Bond Counsel, underwriters’ counsel and disclosure counsel, there is ever more work in the ever-increasing complexity of transactions and the more intense regulatory compliance regimes in both the tax law and securities law, all of which have made this market more challenging for lawyers.”

He added now more than ever, expertise and experience should be and are valued. Relationships with clients, and the quality of attorneys are the keys to the firms achievements.

“We have more attorneys devoted to the full-time practice of public finance than any other law firm. Hawkins is now 164 years old, and has been doing public finance for over 135 years, but we know we cannot rest on our laurels, but we have to earn and deserve the trust and confidence of our clients each and every day.”

Kutak Rock LLP was fourth in bond counsel rankings with $5.87 billion, followed by McCall Parkhurst & Horton LLP with $5.21 billion. Rounding out the top 10 were: Chapman and Cutler LLP, Nixon Peabody LLP, Squire Patton Boggs, Bracewell LLP and Gilmore & Bell PC.

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Rankings Primary bond market Sell side Bond insurance Bond counsel Assured Guaranty Build America Mutual Orrick Herrington & Sutcliffe Hawkins Delafield & Wood LLP Norton Rose Fulbright