Monoline insurer Assured Guaranty – one of the only monolines still standing tall in the aftermath of the global financial crisis – has signalled that it’s back in the business of guaranteeing infrastructure debt with the first monoline bond guarantee post financial crisis.
Assured Guaranty’s comeback deal, which it’s dubbing “the first monoline financial guarantee transaction in Europe since the beginning of the global credit crisis”, sees the firm replace Ambac as guarantor for a £97.2 million (€117.6 million; $150.3 million) bond maturing in 2030. The bond was raised in 1999 to help fund the construction and operation of the UK’s Worcestershire Royal Hospital.
The monoline guarantee enhances the creditworthiness of the bond, since Assured Guaranty says it “guarantees timely payment of scheduled principal and interest to bondholders, throughout the life of the bond”. The monoline ‘wrap’ has led ratings agency Moody’s to re-rate the Worcestershire bonds Aa3, reiterating their investment grade status, with bondholders paying for the guarantee through a reduction in the coupon of the bonds, Assured Guaranty said in a statement.
More importantly, though, is Assured Guaranty’s assertion that this deal marks the first of many to come.
“[This deal] marks a very important step in bringing the capital markets back to infrastructure finance and revalidates the monoline financial guarantee model as a key part of that,” Nick Proud, chief executive of Assured Guaranty Europe, commented in a statement.
To which managing director Dominic Nathan added: “We are seeing a resurgent investor appetite for guaranteed infrastructure bonds – this is the first of a number of deals in our pipeline that we expect to close. Having survived the financial crisis […] Assured Guaranty is well placed to play a leading role in financing infrastructure projects in the UK and Europe at a time when the banks are retreating from long-term lending.”
The infrastructure industry has been scrambling to fill the void left by the monoline insurers – which presided over a successful £100 billion European infrastructure bond market from 2000 to 2007 – ever since the crisis caused most of these companies to collapse.
So far, and despite a raft of new debt funds and initiatives like the European Investment Bank’s project bond initiative, the capital markets have yet to return to the mainstream of European public-private partnership financing.