ACA-RATED BONDS GET A BOOST AS INSURER EARNS AN ‘A’
Standard & Poor’s reaffirmed its “A” rating of ACA Financial Guaranty Corp., signaling a strong vote of confidence in the quality of credit enhancement provided to ACA insured bonds.
Citing a revised business strategy, effective management, and strengthened capital base, S&P, once again, reinforced its opinion of ACA’s core strengths as a bond insurer. This action allows ACA to provide transactions it insures with an “A” rating, rather than using the actual or underlying rating such issuers would have received on their own.
ACA’s capital and other claims paying resources were $882.5 million at year-end 2006, an increase of $158.9 million over the prior year. S&P cited strong earnings growth and business origination as the source of the increase. S&P also pointed to a lower risk business plan and solid position in its structured finance and collateralized debt obligation (CDO) asset management business.
S&P’s review of ACA also found no significant losses attributable to the insurer’s high- quality portfolio of subprime mortgage collateral.
Success focusing on smaller issuers
ACA has been successful in targeting smaller, one-time issuers in the municipal market that are not served by the larger “AAA” insurers. Such insurers prefer larger, frequent issuers and don’t wish to invest the time and energy required to properly evaluate unusual or smaller transactions.
ACA’s approach is to provide credit enhancement to this substantial segment of the municipal market, especially for credits that would be rated “BBB” or below. ACA hires seasoned analysts who are experienced in the various sectors in which they work and provides strong annual review of outstanding insured transactions. ACA specializes in areas such as non-profit cultural institutions, charter schools, student housing and Native American tribal transactions.
ACA offered its shares to the public for the first time in November 2006 and raised $79.3 million for corporate purposes. ACA’s ongoing book of business is continually reviewed by S&P to ensure diversification by credit quality and risk. This annual review, completed in early June, provides an overall assessment of ACA’s business and represents a strong vote of confidence in the quality of credit enhancement provided to bonds carrying ACA insurance.
6/14/07
About Dr. Abrams
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