BRADENTON, Fla. — Florida's Citizens Property Insurance Corp. officials say they hope two rating upgrades will help expand its investor base for this week's pricing of $1 billion of senior revenue bonds.
A retail order period is scheduled Tuesday for the offering, which is preliminarily structured as $750 million of fixed-rate bonds with five, seven, and 10-year maturities, and $250-million in three-year floating rate notes. Institutional pricing is Wednesday.
Proceeds from the tax-exempt paper will provide Citizens' coastal account with liquidity, or a cash bridge, should funds be needed to pay claims quickly if Florida is hit by a hurricane during the upcoming June 1 through Nov. 30 storm season. Otherwise, bond proceeds will be invested.
Florida has not been struck by a hurricane for nine years, and that inactivity has bolstered the state-run, nonprofit Citizens balance sheet for the 2015 hurricane season.
"Citizens' financial position is more robust than ever, and its credit is stronger as represented by two of the three rating agencies," said chief financial officer Jennifer Montero.
Montero also said she believed the rating upgrades helped attract new investors to roadshow presentations in advance of pricing, including trust fund managers.
Citing the agency's "healthy" financial position, Fitch Ratings upgraded Citizens' coastal account bonds, including this week's offering, to AA-minus from A-plus, while Moody's Investors Service upgraded its ratings to A1 from A2. Standard & Poor's maintained its A-plus ratings on the bonds. All outlooks are stable.
Citizens wants not only an expanded investor base as a result of the higher ratings, but also for the upgrades to improve the relative value of Citizens' offering, said financial advisor Kapil Bhatia, managing director at Raymond James & Associates Inc.
"We want to make sure the investor base is diverse and vast," he said. "We're looking for strong investor participation based on our roadshow we just finished."
Bhatia said the final structure of this week's deal will be determined at pricing, and that includes how much in floating rate notes will be offered versus fixed-rate bonds.
"We want to see where the master demand is," he said. "We are flexible."
For the past two years, Citizens has strengthened its finances by focusing on returning the agency to the insurer of last resort as policies are removed by private sector insurance companies, Bhatia said.
Since 2011, Citizens has reduced the number of policies in the coastal account from 460,161 with an exposure of $229 billion to 282,863 policies with an exposure of $116 billion in December 2014. The numbers represent a 49% decrease in exposure.
At the end of 2014, the agency had $12.4 billion in claims-paying resources on hand, including surplus or cash, reinsurance, and risk transfer resources.
Citizens also has vast power to assess its own policyholders and most other policies in the state, including vehicle insurance, to collect funds to pay back debt. The assessment base totaled $39.3 billion, the highest ever recorded, due to increasing demand for insurance in Florida and high premium rates.
Bank of America Merrill Lynch will be the book-runner for the fixed-rate bonds being issued this week. JPMorgan will be the book-runner for the floating-rate bonds.
Other underwriters on the deal are Citi, Jefferies, Morgan Stanley, RBC Capital Markets, Ramirez & Co., Stifel, Nicolaus & Co., and Wells Fargo Securities.
Greenberg Traurig PA is bond counsel. Bryant Miller Olive PA is disclosure counsel. Nabors, Giblin, Nickerson PA is underwriters' counsel.
In the coming weeks, the state-run, nonprofit Florida Hurricane Catastrophe Fund, which offers low-cost reinsurance to private companies as well as Citizens, will also be issuing bonds for liquidity needs. The structure of the $1.2 taxable billion deal has not been released.