Yet another scandal hit the ABS market last week, as Academic Management Services Corp., a unit of financial services and insurance conglomerate UICI, announced inaccuracies and collateral shortfalls within its single-seller ABCP conduit, EFG Finding III. The situation was seemingly resolved, however, thanks to MBIA, which had UICI inject federally insured collateral into and rotate non-conforming loans out of the trust. MBIA had surety exposure to $839 million of term and auction-rate securities as well as having wrapped the $663 million EFG III conduit facility.
The problems at AMS were threefold, according to UICI. In its initial release on the topic, UICI listed an insufficient amount of collateral within the trusts, a greater-than-permitted amount of privately insured collateral and reporting deficiencies, which prevented the aforementioned from being noticed. To remedy the situation, UICI agreed to contribute $48.25 million to the EFG III ABCP program as well as transfer in $189 million of federally insured collateral into the trusts. Additionally, $34.4 million of uninsured loans will be rotated out.