More than a year after pulling a similar offering, insurer American International Group was in the market with an insurance premium-backed security last week. The official reason given for pulling last year's offering was "market conditions." Sources close to the situation have called it a pricing issue.
This time around, AIG tapped Salomon Smith Barney as lead manager, instead of last year's lead Goldman Sachs. Goldman was not even offered the crumbs of a co-managing role in this year's rendition of the deal.
The $518.6 million offering, series 2002-2, has a comparable structure to previous AIG insurance premium securitizations. The majority ($500 million) of the floating transaction is a triple-A rated senior class, and the remaining $18.6 million in a single-A sub class. Also, approximately $18.4 million of a retained C class supports both offered classes. Additional enhancements are excess spread and an AIG support agreement.
The five-year, triple-A senior class was marketed last week in the 20 basis point area over one-month Libor.
While the official word from Goldman last year was that market conditions were responsible for the deal's failure, later that month a similar insurance premium securitization from Premium Financing Specialists priced, albeit at a significant spread premium to where AIG 2001-1 was offered.
At the time, other sources indicated that investors were wary of the issuer in the wake of the high-profile Hollywood Funding debacle, in which AIG unit Lexington Insurance Co. legally loopholed out of its obligations as a surety, leading to the default of two film receivables-backed deals.
The five-year senior class of the AIG 2002-1 deal was talked in the high teen basis point area over one-month Libor. PFS priced its MBIA-wrapped senior class in May of 2001, also with a five-year average life, with a 33 basis point coupon over Libor.