Insurable Municipal Bonds

Assured Guaranty offers municipal bond insurance for investment grade financings across most of the the U.S. municipal bond market,

AGM, MAC and AGC insure the most common types of municipal bonds:

General Obligation and Tax-Backed

Utility Revenue

Transportation Revenue

Additionally, AGM and AGC offer insurance for selected bonds in the following sectors:

Healthcare

Higher Education

501(c)(3) Not-for-Profit Organizations

Housing Finance Agencies

Student Loans

General Eligibility Criteria for Municipal Bond Insurance

We insure municipal bonds secured generally by either a pledge of taxes or a dedicated, investment-grade revenue stream from an essential public service. At a minimum, insured transactions must meet Assured Guaranty’s internal standard for investment-grade underlying credit quality.  A public rating is not essential, but we require one or more rating agency unpublished credit assessments for municipal bonds that do not carry public underlying ratings. Although the majority of our insured transactions are of single-A or higher underlying credit quality, transactions with lower investment-grade ratings (in the BBB range) are candidates for municipal bond insurance because we evaluate each situation individually.

We consider:

  • the nature and priority of the obligation and security provided (for example, a pledge of specific revenues or a pledge of taxes)
  • the essential nature and exclusivity of the franchise or service
  • the financial condition and liquidity of the issuer
  • economic and demographic conditions and trends that will affect the issuer's ability to pay its debt.

G.O. and Tax-Backed

In underwriting general government and school district transactions, Assured Guaranty considers many factors, including the nature and diversity of the economic base, demographic trends and the issuer’s fiscal management track record. Working with the municipal obligor’s financial advisor or investment banker, our analysts focus on understanding the full credit picture and do not automatically disqualify a transaction based on arbitrarily fixed credit criteria, such as a minimum population size.

General Obligations: General obligations are backed by the full faith and credit of the municipal issuer. We insure G.O. bonds that are supported by a pledge to levy either unlimited or limited ad valorem property taxes to cover debt service.

Tax-Supported: We insure a range of special tax bonds, including sales tax bonds, hotel tax bonds and other non-ad valorem revenue bonds. We also guarantee special assessment, tax increment and tax allocation bonds, as well as lease financings, such as lease revenue bonds and certificates of participation (COPs), and moral obligations, which are issued for state agencies or authorities with the implicit backing of the state, subject to appropriation.

Utilities

We provide bond insurance for large and small revenue bond financings in a range of sectors, including water and sewer, natural gas, electric power and resource recovery. We do not specify a minimum customer base for utility transactions but analyze historical and projected debt service coverage ratios in light of economic and demographic trends in the service area. In the investor-owned utility (IOU) sector, we concentrate on investment-grade electric and water companies.

Transportation

We provide municipal bond insurance for both general airport revenue bonds (GARBs) and passenger facility charge (PFC) issues for major and selected regional airports, considering such factors as origination and destination enplanements and the degree of dependency on a single carrier. We also insure revenue bonds backed by tolls collected on roads, bridges and tunnels and, for mass transit financings, by fare-box revenues, motor fuel taxes and vehicle registration fees, in each case evaluating the adequacy of the payment source in light of projected traffic levels and regional economic trends.

Healthcare

With the passage of healthcare reform introducing new uncertainties for investors, bond insurance has become more valuable in the not-for-profit healthcare sector.  We are committed to identifying and supporting not-for-profit hospitals and hospital systems that are positioned to succeed in the new environment.  Looking at each transaction on its own merits, we negotiate terms and conditions for insurance that take into account issuers’ need to respond to changing market conditions. Issuers that qualify for our guaranty are market leaders providing healthcare services that are essential to the areas they serve. We pay particular attention to relative market position and the direction of volume trends in the local market.

Other considerations include operating costs, revenue composition, length of inpatient stays, information systems, quality of management, and the staff’s capabilities and relationship with management, as well the healthcare organization's record of  financial performance.

Higher Education

We insure revenue bonds for public and private colleges and universities. Bonds may be secured by tuition, general revenues or specific revenues from dormitory, dining, student activity or other fees. For private institutions, we guarantee taxable as well as tax-exempt revenue bonds, which may be issued directly by the institution or by state educational authorities.

501(c)(3) Organizations

We provide our guaranty for selected issuers that qualify as tax-exempt organizations under section 501(c)(3) of the Internal Revenue Code.   These include private primary and secondary schools with proven, sustainable franchises, as well as selected educational and cultural institutions and human services organizations.  Our analysts have a track record of negotiating well-secured, insurable transactions that have flexible terms and conditions for issuers.

Housing Finance Agencies

Student Loans

Starting the Process

If you are an issuer or financial advisor with a negotiated or competitive transaction you would like us to consider for insurance, please provide the following documents to us no later than seven business days prior to the sale date:

  • Preliminary Official Statement
  • The last three years of audited financials of the issuer
  • Any other material documentation

 

Send electronic copies to: procurement@agltd.com

 

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