Though more or less anticipated for the past several years, it looks like Financial Guaranty Insurance Corp. is finally shedding GE Capital Corp. as its controlling parent.
The official closing is not expected until fourth quarter, though elected CEO Frank Binova, former vice chairman and CFO at Ambac, has made it clear he plans to take the surety into new ABS asset classes, and perhaps into the international space. FGIC has done most its business in the municipal market over the past several years.
The move also represents a new strategic initiative for PMI Group, which is leading a group of investors that includes The Blackstone Group and Cypress Group. GE will maintain a minority interest. According to ASR sister publication The Bond Buyer, FGIC will pursue CDOs and asset-backeds in the European markets as well as Japan.
For investors wanting to diversify their monoline exposures, FGIC is merely the latest triple-A surety indicating interest in new asset classes. A dominant player in the home equity market throughout the 1990s, FGIC is by no means a newcomer, and has made several periodic resurgences. But the conservative GE tended to keep the firm on a short leash, analysts said.
It remains to be seen if FGIC-wrapped home-equity will be affected by the new endeavors. While investors may like the name for its scarcity value in some sectors, it's at least imaginable that existing FGIC-wrapped deals could see some widening as the surety loses the backing of GE and takes on new risk exposures, one bank researcher noted.
As reported in ASR's Guarantor, FGIC has had two consecutive strong quarters in HELOCs this year, wrapping $3.24 billion in 2Q03, up slightly from the prior quarter's $2.8 billion. This is a significant spike in volume for the surety, which wrapped less than $1 billion for all of 2002.