BRADENTON, Fla. -Louisiana Citizens Property Insurance Corp. got a two notch upgrade in its bond ratings ahead of a planned $350 million refunding.
The upgrade to A1 from A3 reflects the state-owned, nonprofit agency's stabilization since Hurricane Katrina in 2005, Moody's Investors Service said Thursday. The rating applies to $682 million of rated debt. The outlook is stable.
The A1 rating also applies to $350 million advance refunding bonds secured by assessments on property insurance policies throughout the state. The bonds are expected to price the week of June 29, according to Moody's.
The higher rating reflects CPIC's strengthened and stabilized management and administrative processes since Hurricane Katrina, as well as the agency's track record and expertise administering the assessment mechanism through several storms since Katrina, said Moody's analyst Lisa Heller.
The lack of storms has allowed the corporation to resolve several class action suits remaining from Hurricane Katrina without additional bonding, she said.
"The company has largely overcome its operational challenges from its early history and in dealing with Hurricane Katrina, but the rating continues to incorporate a degree of uncertainty around process and security in the aftermath of a very large storm event and the dependence on market access," Heller said.
CPIC bonds are secured by assessments on property insurance policyholders throughout the state to pay for debt service. The upcoming deal will eliminate one emergency assessment reserve fund; however, the debt service reserve fund will remain in place at maximum annual debt service with a stronger surety provider, according to Moody's.
Citizens is a property insurer-of-last-resort, providing coverage for homeowners who cannot obtain it from the private market.
On Thursday, the Louisiana State Bond Commission approved the upcoming $350 million advance refunding.
The transaction is expected to enable Citizens to lower assessments on policyholders to around 3%, chief financial officer Steve Cottrell told the commission. The current assessment is 3.4%. When the assessment was first levied in 2009, it was 5%, he said.
The refunding is anticipated to achieve net present value savings of 5.7% or about $23.7 million if the bonds are issued as uninsured securities, according to commission documents.
Citizens long-term, unenhanced bonds are rated A-minus by Fitch Ratings and Standard & Poor's. Neither agency has issued ratings for the upcoming deal at press time.
Morgan Stanley & Co. is the book-runner. Breazeale, Sachse & Wilson LLP is bond counsel.
