Municipal market participants in recent weeks began showing a preference for the handful of bond insurers so far unscathed by subprime mortgage worries. The year-end rankings of insurers, however, only hint at how behavior changed during the final weeks of 2007, according to Thomson Financial.
Assured Guaranty Corp. and Radian Asset Assurance Inc. were the only insurers to change positions from 2006 to 2007, as Assured insured more than twice as much in total par to become the seventh-busiest insurer last year. During a year that saw a failed merger attempt between Radian and MGIC Investment Corp., the bond insurer lost market share and fell one spot to eighth in Thomson’s rankings.
Financial Security Assurance Inc. became the busiest bond insurer last year by wrapping 1,690 deals worth a combined $46.2 billion — about 22% of all insured bonds. Ambac Assurance Corp. was second with $45.5 billion of total par, and MBIA Insurance Corp. was third with $44.3 billion.
The year-end data differed from records of the deals that were insured in December. For starters, about 47% of all municipal bonds sold during 2007 carried insurance, while only 30% of bonds were insured during December.
FSA was the busiest insurer during December, winning 52% of all bonds that included insurance. MBIA and Ambac were second and third, respectively.
Assured was the fourth-busiest for the month with a 7.3% market share. Assured, which received its third triple-A rating with a Moody’s Investment Service upgrade in July, had only 1.7% of the insured volume for all of 2007.“One of our core strategies from the time of the [initial public offering] three and half years ago was to grow our public finance business,” said Mike Schozer, Assured’s president. “In the past, our ratings held us back.”
At the beginning of 2007, there were six companies with stable, triple-A ratings from all three rating agencies, and Assured became the seventh during the summer. FSA and Assured are the only two that can claim that status now, after a round of capital-adequacy reviews by Fitch Ratings, Moody’s, and Standard & Poor’s left the others with negative outlooks and watches.
Financial Guaranty Insurance Co. was put on watch by Fitch and Standard & Poor’s, and Moody’s put the insurer on review for a downgrade. FGIC did not insure any deals during December, though the company was still insured $29.6 billion during all of 2007 — 14% of the insured market.
LAW FIRM RANKINGS
Orrick, Herrington & Sutcliffe LLP again was the busiest bond counsel firm, Thomson data showed. The firm worked on 447 bond sales totaling $50.7 billion when full credit is given to each bond counsel working on a given deal.
Hawkins, Delafield & Wood LLP was second with $30.9 billion of bond counsel work, and Squire, Sanders & Dempsey LLP was third with $25 billion. Kutak Rock LLP jumped to fourth with $17.3 billion, after finishing 2006 in seventh with just $10.9 billion.
“It was the fact that a lot of the stuff we are active in had a strong year,” said John Wagner, co-chairman of Kutak Rock’s public finance practice. He added that the growth came from doing a greater number of deals — up to 409 from 368 in 2006 — for the growth.
“Issuers who typically did three deals a year did five or six,” he said.
Chapman and Cutler LLP was bond counsel on 613 deals last year, which was more than any other firm, as measured by the sheer number of deals worked on.
Orrick was also the top underwriter’s counsel, working on $21.3 billion of total par in that role. Nixon Peabody LLP and Hawkins were the second- and third-busiest underwriter’s counsel, respectively.
Ballard, Spahr, Andrews & Ingersoll LLP climbed to fifth from 12th in the underwriter’s counsel list by working on a greater number of transactions and a total par of $10 billion.
Orrick was the top disclosure counsel, as well, being named as counsel on $13.9 billion of bond sales. Sidley Austin LLP, the second-ranked firm, worked on $7.5 billion.
The market’s top three corporate trust banks increased their dominance and combined to account for 80.6% of the municipal bond trustee business.
Bank of New York was the busiest trustee, working on $108.2 billion of bond sales, and US Bank was second with $66.7 billion.
Wells Fargo Bank was third with $37.4 billion, which was more than four times as much as the fourth-busiest firm, Manufacturers & Traders Trust Co.