Start-up municipal bond guarantor BondFactor Co. announced that Jim Gebhardt joined the ranks of the insurer earlier this month.
The 30-year public finance veteran said he wants to be part of “the new state-of-the-art financial architecture in support of credit enhancement.”
Gebhardt was the chief financial officer of the New York State Environmental Facilities Corp. for the last 20 years. He joined BondFactor on Jan. 3 as its chief risk officer.
BondFactor is a New York-based insurer created two years ago by public finance people who once worked at Goldman, Sachs & Co. It is currently working on its business model and attempting to modernize New York insurance laws. Executives say they hope to raise capital and apply for credit ratings later this year.
“I’m coming in with a high degree of confidence,” Gebhardt said, speaking of his optimism that the company will revitalize the bond insurance market.
A number of market participants have written off the idea that the bond insurance industry will make a comeback any time soon. The industry, currently dominated by Assured Guaranty Ltd., wrapped less than 7% of all new issuance last year, versus more than 50% before most of the big players were wiped out during the credit crisis from insuring toxic mortgage debt.
Gebhardt said most people with that opinion are thinking in terms of the legacy model. BondFactor, by contrast, plans to insure bonds using a patented pooling structure that the company says involves less leverage and more lines of support.
“There has been some pre-marketing of the BondFactor concept to various folks in the marketplace, but I don’t think it’s really gotten that level of traction yet,” Gebhardt said. “We expect it will once we get the rating work done and we can start to actively market the product.”
Gebhardt described his move as “a natural progression” given the similarities between the insurer’s nuanced model and the Environmental Facilities Corp.’s program of pledging support for issuers through a built-in cash flow coverage program that he helped design in 1990.
The EFC became a triple-A issuer in 1994, under Gebhardt’s direction, and it continues to maintain the gilt-edged rating. With BondFactor, Gebhardt foresees a similar trajectory.
“I have some experience given the last couple of places I’ve settled into,” he said. “I’ve seen opportunities before and I see the opportunity for BondFactor. I want to be a part of it.”
Brad Wendt, president of BondFactor, said Gebhardt “brings a wealth of experience” to the company, which is now a few hands short of 20 people.
“Gebhardt executed numerous innovative structures that provided sound, stable investments as well as interest rate savings to municipalities throughout New York State,” Wendt said.
Gebhardt’s career in public finance began in 1980 at Oppenheimer & Co, where he started as a junior analyst. He later spent four years as a senior municipal credit analyst for Bankers Trust Co.
His first foray into bond insurance began in 1984 when he joined the Financial Guaranty Insurance Corp. as a vice president. He spent four years there working with structured finance products before moving on to become a tax exempt portfolio manager at Continental Asset Management Co.
Gebhardt was a 2006 recipient of the Municipal Forum of New York’s annual award for urban leadership.
“He’s obviously had a very solid career in the private sector, and respectfully retired in the public sector having added great value to New York State,” Wendt added. “Now he’s feeling pretty great with BondFactor in terms of launching what we believe will be the strongest and most stable guarantee out there.”