CDC IXIS Financial Guaranty (CIFG) will emerge a monoline to be reckoned with in 2004, having established licenses to provide insurance in roughly 28 U.S. jurisdictions within the last 45 days. Until now, the firm has been doing much of its business in Europe and, in the U.S., on the municipal side, specifically in New York where it was licensed in 2002.
The newly minted surety receive approval to write insurance in 40 districts by year-end, with plans for all 52 districts, including Puerto Rico and D.C., during 2004, said Jeremy Reifsnyder, managing director and head of CIFG's U.S. structured finance group. On Oct. 31, CIFG announced that it had secured an equity investment of $500 million from parent company, French conglomerate CDC IXIS.
While CIFG has been insuring ABS deals for the past year, most of these have been either CDOs or private placements. To date, on the ABS side, CIFG has only wrapped triple-A obligations, but plans to move into other credit tiers as its book of business grows.
CIFG has grown its book of business from about $2 billion at the end of 2002, to nearly $10 billion, with a 60/40 split between the U.S. and Europe. In 2004, the firm will expand its participation into new asset classes, including residential mortgage-backeds, credit cards, autos and future flows primarily out of Latin America (see story, p. 16). CIFG will continue to participate in the CDO market, expanding its presence across the subsets, such as ABS CDOs and synthetics. Currently, its book is comprised of roughly 60% structured finance and 40% municipal or public finance deals.
Reifsnyder joined the firm from MBIA in April 2002. Several other senior professionals from MBIA's structured finance team - and from other firms as well - moved over throughout the year, rounding out Reifsnyder's group to about 20 individuals.
According to Reifsnyder, the CIFG wrap has been more than well received by the investor community, as it represents "a new balance sheet, a new name and a new international sensibility," he said.
Over the last year, CIFG has been, essentially, road showing its name, establishing a presence in the investment banking (and buyside) community. Before XL Capital Assurance became a player in late 2000, throughout most of the 1990s there were only four triple-A monolines participating in asset-backeds, despite massive volume growth in the market.
Since buying a wrapped deal is taking exposure to that surety's credit, it is not surprising that investors welcome newcomers, especially when sold on the story. On that front, it's hard not to like CIFG, as French banking conglomerate CDC IXIS has strong international presence and a history of 100-plus years in the financial markets.
By ASR's count, CIFG was first seen on a CDO in October 2002, applying its triple-A guaranty to a $300 million static arbitrage deal managed by Vanderbilt Capital. CIFG expects to participate in CDOs between $125 million to $300 million in size.