Assured Guaranty Europe (AGE) has issued a financial guarantee for a U.K. Private Finance Initiative bond issue, the first European monoline wrap since the financial crisis erupted.
The bond was originally issued by Worcestershire Hospital SPC Plc on March 31, 1999 to raise £97.2 million ($148 million) to finance the construction and operation of the Worcestershire Royal Hospital.
AGE replaces the original guarantor, Ambac Assurance UK, to enhance the creditworthiness of the bonds. As the guarantor, AGE guarantees timely payment of scheduled principal and interest to bondholders, throughout the life of the bond, which matures in 2030.
One hundred percent of the voting bondholders approved the appointment of AGE as the new guarantor and controlling creditor.
The guarantees are being paid for by the bondholders through a reduction in the coupon on the bonds. Moody’s Investor Service re-rated the bonds 'Aa3' based on the financial strength ratings of the AGE guarantors, which are rated 'Aa3' (negative outlook) by Moody's and 'AA–' (stable outlook) by Standard & Poor's.
“This is the first infrastructure bond transaction guaranteed in Europe since the onset of the global credit crisis," said Nick Proud, CEO of AGE. "It marks a very important step in bringing the capital markets back to infrastructure finance and revalidates the monoline financial guarantee model as a key part of that - enhancing creditworthiness, reducing and monitoring risks and improving capital treatment for investors, while widening market access and reducing funding costs for issuers.”
Assured said that it is seeing a growing investor appetite for guaranteed infrastructure bonds.
“This is the first of a number of deals in our pipeline that we expect to close," said Dominic Nathan, managing director and head of infrastructure at AGE. "Having survived the financial crisis with some of the highest ratings in the financial sector, Assured Guaranty is well placed to play a leading role in financing infrastructure projects in the U.K. and Europe at a time when the banks are retreating from long-term lending.”