Triad Guaranty announced that it has entered into an agreement with Lightyear Capital, a New York-based private equity firm, to fund the creation of a new monoline.

Under the agreement, Lightyear would be the lead investor and Triad Guaranty would not initially have any ownership in the new company. Lightyear and its investor group plan to provide up to $400 million in the new Illinois-domiciled private mortgage insurance company. Certain members of Triad's current management team and many of its employees are expected to join the new company. Triad Guaranty Insurance Corp. would then enter into voluntary run-off, with the new company providing administrative and financial support to facilitate the run-off plan.

The deal is expected to be completed within four to six weeks, Triad said, and expected to close in 3Q08.

The Illinois Department of Insurance, the regulator of Triad Guaranty Insurance Corp., and the GSEs are all aware of the deal and are currently evaluating the information they have each received, Triad said. Triad Guaranty said it is continuing to write new mortgage insurance business and working on a remediation plan for presentation to Fannie Mae and Freddie Mac, respectively.

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